Variance Calculations for Realized Gain and Loss
Exchange rates for realized gain and loss come from the source and payment transactions. An invoice, vendor bill, or journal entry is the source transaction. The payment transaction can be a payment, credit memo, customer deposit, or journal entry.
When the exchange rates on the source and payment transactions are different, a realized gain or loss is posted. NetSuite automatically calculates the variance amounts for realized gain and loss as the difference between the two exchange rates multiplied by the payment amount. Expressed as a formula where FX Rate is the exchange rate, the calculation looks like this:
Variance = (Payment FX Rate – Source FX Rate) × Payment
The variance is rounded to the base currency decimal precision. The exchange rates are not rounded, and the payment is in the transaction currency.
For payments or credits applied to multiple transactions, NetSuite calculates and records a gain or loss for each transaction.
The posted source transaction amount should equal the posted payment transaction amount plus variance. Amounts posted are in base currency. If the source transaction amount does not exactly equal the payment transaction amount plus variance, a rounding transaction is created. For details, see Rounding Gain/Loss.
For example, your U.S. subsidiary sent a European customer two invoices for €1,000 each. The euro to dollar exchange rate (FX rate) for the first invoice is 1.1. For the second invoice, the rate is 1.2. The customer pays €1,500 on account with a euro to dollar exchange rate of 1.3. You apply €1,000 to pay the first invoice in full and €500 as a partial payment on the second invoice. The base currency total for the invoice equals the base currency total for the payments plus the variance. The calculations when the €1,500 is applied are as follows:
|
|
Transaction Currency |
Payment FX Rate |
Base Currency |
Invoice FX Rate |
Base Currency |
Variance |
|---|---|---|---|---|---|---|
|
Applied to Invoice 1 |
€1,000 |
1.3 |
$1,300 |
1.1 |
$1,100 |
$200 = (1.3 – 1.1) × €1,000 |
|
Applied to Invoice 2 |
€500 |
1.3 |
$650 |
1.2 |
$600 |
$50 = (1.3 – 1.2) × €500 |
|
Total |
€1,500 |
|
$1,950 |
|
$1,700 |
$250 |