Cross Currency Offset

Cross currency offset means you can offset one credit bill against multiple debit bills and vice-versa in the different currencies. Let us understand this with the help of an example.

The following table lists the bills of a customer which are available for cross currency offset:
Account Bill Due Date Bill Segment Contract Type Priority Bill Segment Amount Outstanding Bill Amount Hold Amount
A1 Bill 1 09-18-2018 BS1 10 -$250 -$250 -
Bill 2 09-12-2018 BS2 10 €10 €30 -
BS3 20 €20
Bill 3 09-22-2018 BS4 10 €50 €50 -
Bill 4 09-28-2018 BS5 20 €30 €70 -
BS6 30 €40

The system enables you to offset these bills through a cross currency offset request. While creating a cross currency offset request, you can add the Bill 1 as the primary bill against which you can offset the debit bills - Bill 2, Bill 3, and Bill 4. Note that you can only add completed bills to an offset request. In a cross currency offset request, you can offset the bills which are in the currency different from the primary bill. For example, if you have added a primary bill with credit balance in USD, you can only add the debit bills in the currency other than USD. The system then calculates the total credit and debit bill amount which is available for offsetting, as shown below:

Sum of credit bills’ amount which is available for offsetting: 
-$250
Sum of credit bills’ amount which is available for offsetting (in offset currency): 
-€227
Sum of debit bills’ amount which is available for offsetting: 
(30€+50€+70€)=€150
Sum of debit bills’ amount which is available for offsetting (in offset currency): 
$33+$55+$77=$165

The system considers the credit or debit bills’ total (in the primary bill's currency) whichever is less as the default offset amount. In this case, the default offset amount is set to $165. You can change the offset amount of a bill, if required. However, you need to ensure the following:

  • Offset amount of the selected bill is not equal to zero

  • Total debit offset amount is equal to total credit offset amount in the offset request

  • Negative offset amount is specified for the debit bill and positive offset amount is specified for the credit bill

  • Offset amount is less than or equal to the current outstanding amount of the bill

Note: If you add or remove a bill from the offset request after updating the offset amount, the system overrides the offset amount with the default offset amount. In such scenarios, you have to update the offset amount of the bills once again.

On submitting or approving a cross currency offset request, the system creates the transfer or offset adjustments using the adjustment type which is specified in the offset request. If the Transfer Adjustment option is selected in the respective offset request type, the system creates the transfer adjustments in the Frozen status.

The following table lists the transfer adjustments that are created during the cross currency offset with respect to the above example:
Transfer Transfer Adjustments
1

  • $11 transfer adjustment is created for Bill 1 and matched to -$250 bill segment cancellation (BS1) FT 1

  • -€10 transfer adjustment is created for Bill 2 and matched to €10 bill segment (BS2) FT 2
2

  • $22 transfer adjustment is created for Bill 1 and matched to -$250 bill segment cancellation (BS1) FT 1

  • -€20 transfer adjustment is created for Bill 2 and matched to €20 bill segment (BS3) FT 3
3

  • $55 transfer adjustment is created for Bill 1 and matched to -$250 bill segment cancellation (BS1) FT 1

  • -€50 transfer adjustment is created for Bill 3 and matched to €50 bill segment (BS4) FT 4
4

  • $33 transfer adjustment is created for Bill 1 and matched to -$250 bill segment cancellation (BS1) FT 1

  • -€30 transfer adjustment is created for Bill 4 and matched to €30 bill segment (BS5) FT 5
5

  • $44 transfer adjustment is created for Bill 1 and matched to -$250 bill segment cancellation (BS1) FT 1

  • -€40 transfer adjustment is created for Bill 4 and matched to €40 bill segment (BS6) FT 6

However, if the Transfer Adjustment option is not selected in the respective offset request type, the system creates the offset adjustments in the Frozen status. Considering the above example, the system will create the following offset adjustments for the offset request:

  • $165 offset adjustment is created for Bill 1 and matched to -$250 Bill Segment Cancellation (BS1) FT 1

  • -€10 offset adjustment is created for Bill 2 and matched to €10 bill segment (BS2) FT 2

  • -€20 offset adjustment is created for Bill 2 and matched to €20 bill segment (BS3) FT 3

  • -€50 offset adjustment is created for Bill 3 and matched to €50 bill segment (BS4) FT 4

  • -€30 offset adjustment is created for Bill 4 and matched to €30 bill segment (BS5) FT 5

  • -€40 offset adjustment is created for Bill 4 and matched to €40 bill segment (BS6) FT 6

Similarly, the transfer or offset adjustments are created when the bills are offset across accounts of the person and its hierarchy. The system distributes the amount from the credit bill starting with the oldest due date. For more information on how the offset amount is distributed, see C1-OFST-DIST.

To use the cross currency offset request feature, you need to do the following:

  • Define the required exchange rates in the system.

  • Define a currency conversion algorithm for bill segments using the C1_​CURALGBS or C1_​EXCRTBS algorithm type and attach it to the Currency Conversion For Bill Segments algorithm spot of the required divisions.

  • Define a currency conversion algorithm for adjustments using the C1_​CURALGAD or C1_​EXCRTAD algorithm type and attach it to the Currency Conversion For Adjustments algorithm spot of the required divisions.

You can create a cross currency offset request through the Account Receivables Central and Offset Request screens. For more information on how to create a cross currency offset request, see Creating an Offset Request.