How General Ledger Account Balances Are Translated
The Translate General Ledger Account Balances process restates actual account balances from a ledger currency to a reporting currency. Submit the process after you have completed all journal activity for an accounting period and after finalizing translation rates.
You should rerun the process if you post additional journal entries or change translation rates.
If you reopen a previously closed and already translated prior period and post additional journal entries to it, this will invalidate its translated balances. The accounted balances upon which those translated balances were calculated would have changed because of the new journal entries that were posted.
Even if you don’t correct these translated balances by retranslating this prior accounting period specifically, a translation of any accounting period that succeeds this accounting period will automatically take care of that prior period's translated balances and update them to the correct translated balances. It will also take care of translating any succeeding accounting period leading up to the accounting period that's currently submitted for translation. If these other intervening accounting periods had also already been previously translated, they’re no longer valid as well because of posting the additional journals for the reopened prior accounting period.
Translated account balances, like any other type of account balance, build up from an account's prior period balances. The correct current period translated balances depend on the presence of correct prior period translated balances.
You can submit the translation process for accounting periods with the statuses of Open, Closed, and Permanently Closed. When required, the translation process can also update translated balances for accounting periods in these statuses. Accounting periods with the status of Never Opened or Future Enterable aren’t applicable for translation.
Settings That Affect the Translation Process
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Translation rules
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Translation rate types
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Retained earnings account
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Cumulative Translation Adjustment (CTA) account
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Account type classification for natural account segment values
When you submit the translation process, you specify values for the following parameters:
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Data Access Set: Select the applicable data access set.
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Ledger or Ledger Set: Select the ledger or ledger set for the balance-level reporting currency.
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Target Currency: Select the reporting currency to translate.
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Accounting Period: Select the accounting period to translate. The first accounting period translated becomes the initial translation period for the specified balancing segment values. The next time the process is submitted, translation is processed from the initial translation period up to the Accounting Period parameter that you specify.
Caution: If you're submitting the translation process for the first time, select the Accounting Period carefully. After the initial translation period is set, you can't run the translation process for any earlier period. -
Balancing Segment Value: Leave the parameter blank to translate all balancing segment values, or select a specific balancing segment value.
If you leave this parameter blank and a new balancing segment value has been added since the last translation, the process doesn't automatically translate the new balancing segment value. You must run translation for the specific new balancing segment value to establish the intended initial translation period. The next time you run translation for all balancing segment values, the new balancing segment value is automatically included.
How Account Balances Are Translated
The translation process uses translation rate types and translation rules to restate actual balances from the ledger currency to the reporting currency for the specified balancing segment values. In addition, the translation process updates the balances cube.
Translated period amounts are calculated as follows:
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For Period to Date translation rules, the translated period amount = Period Average Rate * Period to Date Ledger Currency Balance.
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For Year to Date translation rules, the translated period amount = Period End Rate * Ledger Currency Balance - Beginning Translated Balance.
The daily rates that are defined for the last day of the period for the corresponding period average and period end rate types are used as the translation rates. If the rate for the last day of the period doesn't exist, the translation process searches back within the period until a rate is found. If no rate exists for the period, the translation process ends in error.
The translation process totals the translated debits and credits for all account combinations sharing the same primary, second, and third balancing segment values. The net difference is recorded to a corresponding CTA account.
An additional step is performed when the first period of a new accounting year is translated. The translation process first identifies the income statement account combinations that share the same primary, second, and third balancing segment values. The prior year translated balances for those account combinations are then closed out to a corresponding retained earnings account.
Example: Translation Using Period End and Historical Rates
In this example, a Canadian company has a Mexican subsidiary. The translation process is run on the subsidiary ledger to convert balances from the Mexican peso (MXP) to the Canadian dollar (CAD).
The following figure shows an example of translation. In this example:
- The period end rate of 0.75 translates 100,000 MXP in assets to 75,000 CAD, and translates 60,000 MXP in liabilities to 45,000 CAD.
- The historical rate of 0.70 translates 40,000 MXP in Owner's Equity to 28,000 CAD.
As a result, an offset of 2,000 CAD in the translation currency, created by the different rates, is recorded in the CTA account.
