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Foreign currency across a group

Each company keeps its books in its own currency, its functional currency. The group reports in one reporting currency. Fynease works from both, and this page covers everything currency-related apart from the translation adjustment itself, which has its own page.

Where the exchange rates come from

• For a company on QuickBooks Online, rates are read from that company's own QuickBooks exchange-rate table, every night for the current and previous month and on demand from Connect Data.
• Each month gets two rates: a closing rate (the month-end rate) and an average rate for the month.
• Rates are kept for each foreign currency a company uses and for the group's reporting currency, each against the company's own currency.
• Gaps can be filled from European Central Bank rates in Connect Data, FX Rates. ECB rates never replace a QuickBooks rate or one you typed.

Rates you set

• Type a rate in Connect Data, FX Rates and it wins over every source. The nightly sync never overwrites it, and the change is logged with the rate it replaced.
• A balance sheet account can carry a fixed rate of its own, for balances that should not move with the closing rate.
• Share capital can take a historical rate derived from the cap table.

Functional and reporting currency

• Both are set per company in Client Settings. For a QuickBooks company the functional currency follows the home currency QuickBooks reports.
• Analysis shows a company in either currency. The income statement translates at the monthly average rate, and a quarter or year at the average of its months; the balance sheet translates at the closing rate, or an account's fixed rate. A reporting rate typed in Client Settings is used for a month with no synced rate. A month with no rate at all returns the view to the company's own currency and names the month, rather than showing untranslated figures.
• A report package is built on the books basis (each company's own currency, fiscal year and accounting standard) or the reporting basis, and says which. Income statement figures translate at the average rate of the window and balances at the closing rate of its last month. A month with no rate withholds the translation and names the month, rather than showing a converted figure.
• The cash flow translates on the same rules: flows at the average rate, cash at the closing rate of each end, and the difference its own line, the effect of exchange rate changes on cash. The change in cash then agrees with the translated balance sheet, and in Analysis the direct and indirect methods end at the same figure.

Consolidating companies in different currencies

• Each member is translated into the group currency before the members are added together, so every figure on a consolidated statement is in one currency. Each month uses its own rate, or the rate typed in Group Settings; a month for which a member has neither is withheld, and the member is named.
• Posted elimination entries are translated at their own closing rate.
• The group cash flow is built from its members: each member's cash flow in the group currency, month by month at the rates the consolidated statements use, then added, with balances between the companies as one net line. Its net income is the consolidated income statement's and its closing cash the consolidated balance sheet's. A member month without a rate withholds the statement and names the member.
• Equity is translated at historical rates, and the difference that leaves is the translation adjustment in other comprehensive income. How it is calculated.

Foreign-currency loans and leases

• A loan or lease can be in a currency other than the company's own. Its schedule runs in the loan's currency, and each journal is booked in the company's currency at that month's average rate. With no rate for the month, the journal waits and says which rate is missing.
• When the entry goes to QuickBooks Online it is sent in the loan's own currency, at the rate Fynease booked it, so both sets of books agree.

Revaluation at month end

Foreign-currency loans, leases and accruals are revalued at the closing rate each month: the balance still owed in the foreign currency, at the closing rate, compared with what the books carry. The difference posts to the unrealized foreign exchange gain or loss account you choose for the company. Revaluation waits until that account is chosen and a closing rate exists.

Intercompany between currencies

• Intercompany pairs are compared in the group's reporting currency, so two companies in different currencies can be matched. Without an observed rate for the month, a pair is never signed off automatically.
• An intercompany entry between two currencies asks for the amount in each company's own currency and flags the entry to check the amounts before posting.

Forecasts

• A forecast holds each currency at the latest observed average rate unless you set a rate or a drift. A currency with no observed rate is left out rather than converted one to one.
• The effect of currency shows on its own lines under revenue, cost of sales and operating expenses.
• A sensitivity shows the EBITDA effect of a percentage move in each rate over twelve months.

What Fynease does not do

• Daily or transaction-level rates: rates are monthly, closing and average.
• Automatic revaluation of foreign-currency receivables, payables or intercompany balances; revaluation covers loans, leases and accruals.
• A 13-week cash forecast across currencies: it runs in each company's own currency.

More in Consolidation

• Intercompany reconciliation
• Elimination entries
• Non-controlling interests
• The translation adjustment (CTA)

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