About Currency Translator

Currency Translator expresses data in international currencies when creating multinational financial models. For example:

• A financial model including international subsidiaries, and the data is in different currencies.

• Associates or lenders in other countries need your data expressed in their national currency.

Using Currency Translator, you add exchange rates to financial models and assign those rates to currency accounts to translate the data to a new currency. After you translating, you can view or print reports showing the results.

If you are translating data from a company in a country with high inflation, please review Currency Translator Calculations before translating the data—you should remeasure the data first.

Note:

Use Currency Translator to apply rates to currency accounts only. You cannot apply rates to accounts expressed in items or ratios.

Using the Currency Translator

To use Currency Translator:

1. From the Data grouping label, click Currency Translator.

   A warning is displays stating that Strategic Modeling adds Currency Translator accounts to the model.

2. Click OK to display Currency Translator.

   The actual exchanges rates are defined in Currency Translator memo accounts added to the Accounts spreadsheet:

   • v100.00.000 Weighted Average Exchange Rate

   • v105.00.000 Period End Exchange Rate

   • v110.00.000 Equity Historical Exchange Rate

   • v115.00.000 User Defined Exchange Rate—The only subaccountable Currency Translator account.

     By default, the v115 rate is assumed for all subaccounts.

3. Select General Information to define basic currency translation information—see Managing Summary Information About the Current Model.

4. Select Assign Exchange Rates to define exchange rates—see Setting Exchange Rates for Currency Translations.

5. Click OK.

Setting General Information About Currency Translations

On General Information, you define source and target currencies, exchange scales, and rate names, if applicable.

To set general currency translation information:

1. Access Currency Translator.

2. Select General Information.

3. In Define Exchange Rates As, select the currency-to-currency type conversion.

   • The first box is the destination currency.

     Currency Translator assumes the default currency in the Summary Information is the translated currency.

   • The second box is the source currency.

   For example, you are translating Dollars per Peso. The rate in the memo account is the number of Dollars equalling one Peso.

   If you do not see the currency in the list, enter the name.

4. Optional: In Scale, change the scale of the translated data.

   Change the scale when more of one currency to makes less of the other. For example, you change the scale to millions or thousands to eliminate trailing zeros.

   As with the default currency, enter the default scale in File, then Summary Info, and then see the following link:

5. Optional: Select Use Rates from Current Source File to import forecasted rates, and click Browse to select a file.

   After choosing a file, click Import Rates to load the rates. This creates a dynamic link—any changes made to the source file affect the translated file. Last Imported Source File and Last Imported Date reflect the most recent import.

6. Set exchange rates—see Setting Exchange Rates for Currency Translations

7. Click Translate.

Setting Exchange Rates for Currency Translations

To set exchange rates for currency translation:

1. Access the Currency Translator.

2. Select Assigning Exchange Rates.

3. In Account/Dialog Variable select accounts.

4. In Exchange Rate select exchange rates:

   • Weighted Average Exchange Rate

   • Period End Exchange Rate

   • Equity Historical Exchange Rate

   • User Defined Exchange Rate—enter custom exchange rates in the spreadsheet

5. Click Translate.

Revaluations

Currency Translator translates only the first time period and time periods with value changes, and calculates others. This avoids revaluations and provides accurate results without requiring a blended exchange rate of all equity components.

For example, consider these values in American dollars:

Year	Dollars	Rate of Exchange
Common Stock in 2003	100	exchange rate: 3
Common Stock issued in 2004	50	exchange rate: 4
Common Stock in 2004	150	exchange rate: 3

If you use the standard method to translate American dollars to the German deutschmark, these values result:

Common Stock in 2003	300	translated at 3
Commons Stock issued in 2004	200	translated at 4
Common Stock in 2004	450	translated at 3
Revaluation of Stock	-50	-

The translations should be:

• Equity—from 100 to 300

• Issuance—from 50 to 200

The total should be 500, but the translation is 450—a -50 revaluation difference. This error occurs when calculating every time period, regardless of change.

To avoid this error, Currency Translator translates the equity of the first period at the equity historical rate, and translates subsequent periods only if the value changes. Otherwise, they use the first period's value. The values are correct:

Table 12-1 Currency translation

Common Stock in 2003	300	translated at 3
Common Stock issued in 2004	200	translated at 4
Common Stock in 2004	500	calculated
Revaluation of Stock	0	-

See Avoiding Revaluation in Equity Accounts.

Avoiding Revaluation in Equity Accounts

For equity accounts, Currency Translator translates the first period balance and all subsequent flows. As a result, there are no values in the .04 accounts. If there were values in the .04 accounts before translation, they remain in the original currency afterwards. Equity accounts are designed to avoid revaluation, so you should zero the .04 values for all equity accounts.

Copying Local Files to the Server for Currency Translation

If you copy a local file to a server and that file uses translation rates from another local file, it defaults to using residual rates from the last translation run. On subsequent retrievals of the file copied to the server, the local client searches for the local file containing the translation rates.

Currency Translator Retained Earnings Adjustment

Currency Translator assumes that exchange rates for retained earnings reflect the historical basis of the account, and translates retained earnings in historical periods. It calculates the retained earnings and compares it to the translated data. If they do not match, Currency Translator adjusts the translated data to balance the Funds Flow report.

Currency Translator calculates retained earnings as:

Retained Earnings =	Retained earnings (prior period)
-	+ Income available for common dividends
-	- Common dividends
-	+ Funds flow adjustment: sources
-	- Funds flow adjustment: uses

Retained Earnings Adjustment =	Retained earnings
-	- Retained earnings (prior periods)
-	- Income available for common dividends
-	+ Common dividends
-	- Funds flow adjustment (sources)
-	+ Funds flow adjustment (uses)

Strategic Modeling adds the retained earnings adjustment to the account structure so you can review how it calculates. The Translator adjusts the amount and creates an account called the Retained Earnings Adjustment Account (v2853.0.000)

Example:

In Deutschemarks

(adjustment applies to all historical periods, except the first historical period)

Item	2003	2004
Retained earnings	500	2000
Net income	-	2100
Dividends	-	600
Equity exchange rate	.7	.7
Year-end exchange rate	.667	.75
Weighted avg. rate		.72

In U.S. Dollars - After Translation

Item	2003	2004
Retained earnings	350	1400 direct translation at equity historical rate
Net income	-	1512 weighted average rate
Dividends	-	432 weighted average rate

The retained earnings calculated by the normal retained earnings formula is:

350
1512
(432)
1430

The retained earnings is not calculated for 1400. This difference of 30 is the retained earnings adjustment.