Balance Item Currency Translation Differences

Balance item currency translation differences should contain as few elements as possible to facilitate reconciliation.
Note: The calculation of the final currency difference includes accounts of type A (Assets), L (Liabilities), E (Equity) I (Income) and C (Expenses). The account types are determined when you set up the account structure. You define in the general configuration where the final balance items should be booked.

For more information, see Account Structuresand General Configuration Settings.

Current Method

The currency translation of equity must be controlled in detail, so that the balance item will, using the current method, only contain the two differences that are mentioned next. You should create movement accounts for equity and define them for currency translation.

Even if you define the currency translation in detail by creating specification accounts, a final currency translation difference occurs, which normally consists of:

  • the difference between the closing rate and the average rate multiplied by the net income in local currency.
  • any rounding difference that may have arisen during currency translation.

The system assumes that currency translation method 1 is the current method and books the final currency translation difference to an account in the balance sheet, defined in the general configuration.

Monetary Method

Currency translation method 2 is the MNM method, in which the currency translation difference is booked to an account in the income statement (according to the general configuration).

In the MNM method, the balance sheet is considered as a specification for the income statement, as the final currency translation difference appears in the income statement. This can be a problem if the accounts make use of extended dimensions. If the accounts in both the income statement and balance sheet use extended dimensions on the same level or if the income statement has extended dimensions on a higher level than the balance sheet, it will be possible to book the final currency translation difference, but not in any other case, unless you use the option in the general configuration.

General Configuration for Monetary Method

If the balance sheet accounts do not use any extended dimension at all, while the accounts in the income statement do, the solution is to use the Book Currency Translation Difference on Extended Dimension option in the general configuration. Select the extended dimension codes where the currency translation difference should be booked.

There is also an option in the general configuration where you can re-define currency translation method 2 so that the current method rules are used instead.

For more information, see General Configuration Settings.