Methods for Obtaining Exchange Rates
After you choose your exchange rate provider, you specify the method NetSuite should use to obtain exchange rates. You have the option to permit NetSuite to use a triangulated calculation to obtain the exchange rate. This is used when the two home currencies in a transaction are not available as standard currency pairs from the selected rate provider. In this case, the exchange rate must be calculated. However, if you do not use this option, you are specifying that your method of obtaining exchange rates should be direct.
If you use the Currency Exchange Rate Types feature, note that rate provider integration works only with the default currency exchange rate type.
Triangulation Calculation
When you check the Use Triangulation Calculation by NetSuite box in accounting preferences, you permit NetSuite to use cross currency triangulation to calculate the exchange rate for a transaction. To use triangulation, you must agree to the Notice that appears when you check the box. Triangulation is useful when the two currencies involved in the transaction are not available as standard pairs from the selected rate provider. Triangulation provides a method for two entities to simultaneously transact business in one currency, and at the same time repatriate money and profits back to the two base currencies.
Cross currency triangulation works by first converting the monetary amounts from one national currency unit (source currency) into an intermediate currency (anchor currency). The calculation then coverts the amount in the intermediate currency into the designated national currency unit (target currency).
For NetSuite to be able to calculate the exchange rate for a cross currency pair, you must specify the intermediate, or anchor, currency to use in the calculation. For more information, see Anchor Currencies.
If you choose Xignite as your provider and permit NetSuite to triangulate, rates greater than 1 will round to the sixth digit after the decimal. Rates less than 1 will have a precision of 6 significant digits.
Example
Company 1 uses the following currencies:
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USD – Base Currency, set to update at GMT -5. This is an anchor currency.
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PHP – Base currency, set to update at GMT -5.
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XXX – Non-base currency.
Company 2 uses the following currencies:
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USD – Base Currency, set to update at GMT -5. This is an anchor currency.
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PHP – Base currency, set to update at GMT +9.
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XXX – Non-base currency.
Assume your specified exchange rate provider does not provide a rate conversion from XXX to PHP. In this case, an XXX to PHP rate conversion must be triangulated through USD. Company 2 uses USD exchange rates as anchor at GMT-5 to ensure that XXX to PHP can be computed. Then USD exchange rates are again used as a base currency on GMT+9.
Formula
When your rate provider cannot provide a rate from Currency A to Currency B, then Currency A Currency B becomes (Currency A ÷ Anchor Currency) × (Anchor Currency ÷ Currency B).
For example, if
AED (United Arab Emirates Dirham) = Base Currency and Currency B
RWF (Rwandan Franc) = Foreign Currency and Currency A
USD = Anchor Currency
and RWF to AED is not available in your rate provider.
Then
RWF ÷ AED = (RWF ÷ USD) × (USD ÷ AED)
RWF ÷ USD = 0.001451
AED ÷ USD = 3.672420
0.001451 × 3.672420 = 0.005328
If you check the Use Triangulation Calculation by NetSuite box but do not agree to the Notice, NetSuite clears the check box, and the Currency Exchange Rate Integration feature provides only those rates received directly from the specified rate provider.
If you agree to the Notice, NetSuite stores the user id and time and date stamp of account changes in system notes.
Direct Rate
Direct currency exchange rates are provided directly from your specified exchange rate provider.
Inverse Rate
Inverse rates are based on the direct rate. An inverse rate is 1 ÷ the direct rate. NetSuite uses the inverse rate only when a direct rate is not available from the exchange rate provider, a suitable currency pair is available, and you have enabled triangulation in your account.
For example, you have three currencies defined in your account:
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U.S. Dollar (USD) - base currency
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Turkish Lira (TRY) - base currency
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Indonesian Rupiah (IDR)
You can store the following source to base currency rates:
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TRY to USD
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IDR to USD
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IDR to TRY
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USD to TRY
Your rate provider does not provide a rate for IDR to TRY. However, you have enabled triangulation in your account, and the rates that NetSuite downloaded from the provider included TRY to IDR. NetSuite then stores the inverse of the TRY to IDR rate as the rate for the IDR to TRY pair.
The inverse rate that displays on the Currency Exchange Rates page at Lists > Accounting > Currency Exchange Rates is the most recent rate for that currency rate pair before the as-of-date. Note that if an as-of-date is not provided, today’s date and the current time serve as the as-of-date.
The initial rate stored within NetSuite was obtained when the new currency was created in the system. Subsequent rate updates and as-of-dates were provided either from the rate provider or from a manually entered exchange rate.
For information about adding rates in this list, see Adding Rates to the Currency Exchange Rates List.
If Xignite is your chosen rate provider and you use inverse rates, rates greater than 1 will round to the sixth digit after the decimal, and rates less than 1 will have a precision of 6 significant digits.