FI-GL Currency translation
Overview
The program is used to translate the amounts in local or transactioncurrency into the relevant group currency. Using this, thegroups of accounts (basic-sets) defined in advance (due to businessrequirements) can be translated in different ways using varyingexchange rates. This means that, for example, assets can be translatedusing historical rates, balance sheet accounts can be translated as ata particular key date, and income statement accounts can be translatedin every period. The use of different currency translation keys leadsto problems: let us assume that the sum of all accounts in localcurrency is zero. If this account is then translated using the same keyand the same exchange rate, this would represent a multiplication ofevery account with a constant factor, then the balance in groupcurrency would also be zero. However varying valuation of the sameaccount will lead to a balance that is not zero. This, in turn, meansthat the balance sheet will not balance and necessitate the posting ofreconciling amounts.
The currency translation is carried out in two steps. First, a standardvaluation of all accounts using a "reference translation" takes place(corresponding to the spot rate translation). Second, the basic setsdescribed above with their respective currency translation keys andtheir assigned exchange rates are valued. A difference is formed fromthe results of these two procedures. These translation differences areassigned to particular items using sets are stored directly in the database.
In addition rounding differences can occur when translating values ingroup currency. These prevent a zero balance in the group currency. Therounding differences are assigned to accounts and stored directly inthe data base.