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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 (the mean of the rates on the 1st, 8th, 15th, 22nd and last day of 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 worked out from the cap table, weighted by the amount each round raised.

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 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.

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.
• Posted elimination entries are translated at their own closing rate.
• 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.
• 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, and the remeasurement of the net monetary position goes to other income and expense.
• 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
• The translation adjustment (CTA)

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