Current Method

The current method for currency translation can be used in several ways.

One way is to convert all accounts in the income statement and the balance sheet, at the closing rate. A more usual way is to convert all accounts in the income statement at the average rate for the year, and all accounts in the balance sheet, with the exception of equity, at the closing rate. Instead, equity is converted at the historical rate. A common feature of the different applications of the current method is that the period’s profit in converted currency is determined in the income statement and copied to the account for net income in the balance sheet, in which the currency translation difference becomes a balance item.

Investments in Group Currency

Note: If the equity accounts in the balance sheet are converted at the closing rate, the amount for share capital will be different each year. However, in the investments analysis, share capital can be valued at the historical rate. To eliminate the entire share capital in a subsidiary, you must calculate a currency translation difference for the share capital in the investments register. This only applies when the investments are stored in the group currency.

For more information, see Automatic Journals for Acquisition Calculations.

Fixed Assets and Untaxed Reserves

By defining the accounts with the currency translation code I, the opening balance values are loaded in the specifications of fixed assets and untaxed reserves from the previous year’s closing balance values. Before running the currency translation the first time, enter data on the closing balance, in both the local currency and converted currency, on the accounts currency translation code I refers to. Alternatively, do not enter any values for the previous year in the currency register, just enter the previous year’s closing rate, to be used instead.

Other accounts in the specification are converted based on the specified currency translation codes. Any currency translation differences are calculated and booked, and then all summation accounts are calculated. Finally, converted values are copied to the accounts in the income statement and the balance sheet. The values will only be copied, if the account in the income statement and/or the balance sheet has been defined with the currency translation code U, V, X or Z. The reason for copying converted values from specification accounts to accounts in the income statement and/or the balance sheet is to avoid rounding differences that would otherwise arise.

For more information about currency translation code U, V, X or Z, see Currency Translation Codes for Accounts.

Equity with Specification

By defining the accounts with the currency translation code I, the opening balance values are loaded in the equity specifications from the previous year’s closing balance values. Before running the currency translation the first time, enter data on the closing balances for the equity from the previous year. Enter it in both the local and converted currency and on the accounts currency translation code I refers to. Alternatively, do not enter any data for the previous year, just enter the previous year’s closing rate in the currency register, to be used instead.

Other accounts in the specification are converted based on the currency translation codes specified. Any currency translation differences in the specification will be calculated and booked. Summation accounts will be calculated and then the converted values are copied to the equity accounts in the balance sheet. The values will only be copied if the account in the balance sheet has been defined with the currency translation code U, V, X or Z. The reason for copying converted values from specification accounts to accounts in the balance sheet is to avoid rounding differences that would otherwise arise.

The profit in the income statement in the converted currency is copied to the account for net income in the balance sheet. The final currency translation difference is booked to the account defined in the general configuration. The currency translation difference is calculated as a balance item, after the profit in the income statement has been copied to the balance sheet.

For more information about currency translation code U, V, X or Z, seeCurrency Translation Codes for Accounts. For more information about definitions in the General Configuration, see Define General Configuration - the Reconcile 1 Tab.

Equity without Specification

The balance sheet accounts are converted at the closing rate (currency translation code B). The profit in the income statement in the converted currency is copied to the account for net income in the balance sheet. The final currency translation difference is booked to the account defined in the general configuration. The currency translation difference is calculated as a balance item, after the profit in the income statement has been copied to the balance sheet.

For more information about definitions in the General Configuration, see Define General Configuration - the Reconcile 1 Tab.

Equity with Register of Historical Rates

The acquired equity share is entered in the register of historical rates at the currency rate, which was applied on the date of purchase. For each new period and actuality, new data must be entered or copied from the previous period and actuality. At the beginning of each year, move the closing balance values from the previous year-end to the opening balances. Other changes between periods, such as issue of shares, are also entered in the register of historical rates.

The accounts are defined with the currency translation codes E, F, or G. When the currency translation is run, the program will load the equity value in the converted currency from the register of historical rates. If there is a difference between the period values and what is entered in the register of historical rates the remainder will also be converted at the historical rate, referring to currency translation code E and F. Regarding the currency translation code G, the remainder will be converted at the period average rate. If there is no value in the register of historical rates, the account will be converted at the closing rate (code E), the average rate (code F), or the period average rate (code G).

The profit in the income statement in the converted currency, is copied to the account for net income in the balance sheet. The final currency translation difference is booked to the account defined in the general configuration. The currency translation difference is calculated as a balance item, after the profit in the income statement has been copied to the balance sheet.

For more information about definitions in the General Configuration, see Define General Configuration - the Reconcile 1 Tab. For more information about Historical Rates, see The Register of Historical Rates.