Foreign Currency Accounting in BusinessVision

Background

Multi-Currency accounting in BusinessVision is designed to satisfy the generally accepted accounting principles in Canada as set out currently by the CPA (Chartered Professional Accountant) standards:

For bank balances, accounts receivable and accounts payable:

At each balance sheet date, monetary items denominated in a foreign currency shall be adjusted to reflect the exchange rate in effect at the balance sheet date.

For sales, purchases, inventory and fixed assets:

Once foreign currency purchases and sales, or inventories, fixed assets and other non-monetary items obtained through foreign currency transactions, have been translated and recorded, any subsequent changes in the exchange rate will not affect those recorded amounts.

 

Multi-Currency set up in BV

There are four aspects to multi-currency setup in BV:

  • Currency Manager, where, for each currency, the current exchange rate is established, as well as a rate for each prior month
  • Currency Revaluation, which evaluates all monetary items (bank, A/R, A/P) denominated in a foreign currency at specific dates and calculates a G/L adjustment to bring the balances to the rate in effect on that date; the differences are put into ‘Revaluation’ accounts
  • Currency Rollup, which moves the differences calculated by the Currency Revaluation from the Revaluation accounts into the associated bank, A/R or A/P accounts

All three of these functions can be accessed by going to Utilities, Multi-Currency Tools.

  • In addition, general ledger accounts are designated with a specific foreign currency, as are customers and vendors.

MC - 1 - Bank

MC - 2 - Customer

MC - 3 - Vendor

Currency Manager

Current and monthly exchange rates are set up in the Currency Manager.

MC - 4 - Currency Manager

The highlighted rate is the current rate; click on the Monthly rates to see the historical rates.

MC - 5 - MC details

 

Underlying Structure

The foreign denominated General Ledger accounts, Accounts Receivable and Accounts Payable are all maintained the foreign currency in addition to Canadian dollars; for every foreign currency entry, there is both a Canadian journal entry as well as a foreign currency journal entry.

The important balance is the foreign currency balance for accounts denominated in a foreign currency since it is derived from the transactions such as sales, cash receipts, purchases and payments. The Canadian balance is merely the calculated equivalent.

For current transactions, the system uses the current exchange rate; for transactions in a prior period, the system uses the rate for that period. If a rate has not been entered, it uses the current rate. Users can also set the exchange rate for specific transactions.

 

Currency Revaluation

GL accounts, in addition to having a currency designation, also have a flag for whether an account is to be revalued or not.

MC - 6 - Revalue flag

Bank accounts, Accounts Receivable, Accounts Payable and other monetary accounts (US GIC’s, perhaps) should be flagged as ‘Revalue’. All income statement accounts as well as capital asset accounts should not be so flagged. Note that inventory is only maintained in Canadian dollars even though inventory vendors might be from the US or elsewhere.

The Multi-currency Revaluation is run for specific month end dates, and only affects those accounts flagged as ‘Revalue’.

MC - 7 - Revaluation dialogue

The revaluation routine calculates the Canadian dollar equivalent of any foreign balances flagged as ‘Revalue’ using the exchange rate set for the period end date, and then it compares it to the Canadian amount previously calculated. The difference results in an unrealized foreign currency gain or loss; the other side of the journal entry is to the companion Revaluation accounts. So, in the example above, there would be a Revaluation account 11110 R. Any prior revaluations are reversed.

 

Revaluation Rollup

This routine transfers the balances from the Revaluation accounts to the base currency account. Users would normally run the Rollup right after the Revaluation. There is no income statement impact to the Rollup entry since it is simply transferring balances between balance sheet accounts.

The Revaluation and Rollup routines therefore satisfy the Canadian accounting principle: monetary items denominated in a foreign currency shall be adjusted to reflect the exchange rate in effect at the balance sheet date.

Checking Results

Bank:

Go the GL, Balances tab for a US account. Toggle the currency. Take the US amount, multiply it by the rate for the period; toggle the currency back to Canadian; you should get the Canadian equivalent.

MC - 8 - Toggle currencies

MC - 9 - US bank balances

Accounts Receivable and Accounts Payable

Print the Aged or Detailed Summary for the month end date; choose ‘Report in base’. The US and other currencies will print on their own page.

Go to the related A/R or A/P balance in the GL. Toggle the currency. The balance in the account should equal the listing. (For example, the US Accounts Receivable listing in US $ should equal the GL balance for US Accounts Receivable, as viewed in US$)

Take the foreign currency total, multiply it by the exchange rate at the end of the period. The total should equal the balance in Canadian dollars for that account.

 

Related Topics

This document provides a high level view as to the structure of multi-currency transactions in BusinessVision.

Other things to consider include:

  • how often the currency revaluations and rollups should be run
  • what rates to set in the currency manager to minimize gains and losses
  • price lists that need to be maintained in a foreign currency
  • vendor pricing in foreign currencies
  • how to book bank transfers between foreign currency and Canadian accounts

Please do not hesitate to contact me for further guidance regarding multi-currency.

rita.bloem@rogers.com

 

 

 

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