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Reporting Currency Conversion Rules

Reporting currency conversion rules differ depending on whether the exchange rate relationship between a transaction and reporting currency is variable or fixed. When there is a variable relationship, the exchange rate between the two currencies fluctuates. When there is a fixed relationship, the exchange rate between the two currencies remains constant, having been fixed at a specific point in time.

Note: As of January 1, 1999, the national currencies of countries who are members of the European Monetary Union (EMU) will become another denomination of the Euro, the pan-European currency. Fixed exchange rates will be used between the Euro and each EMU currency.

Variable Exchange Rate Relationships

Transaction Currency Same as Primary Currency

The following diagram illustrates the conversion business rules that apply when the transaction currency is the same as the primary currency and a variable rate relationship exists between the transaction and reporting currencies:

When the transaction and primary currencies are the same, no conversion is needed to your primary currency. When MRC converts the transaction to your reporting currency, it uses the appropriate reporting conversion type you specified for the application and operating unit that originated the transaction.

See: Step 5 - Define Conversion Options for Each Application
  Step 6 - Define General Ledger Conversion Rules

Transaction Currency Differs from Primary and Reporting Currency

The following diagram illustrates the conversion business rules that apply when the transaction currency differs from both the primary and reporting currency, and a variable rate relationship exists between the transaction and reporting currencies:

Your application converts the transaction to your primary currency using a conversion rate type you specify, or the rate type EMU Fixed when both of your currencies are either an EMU currency or the Euro. For example, EMU to EMU, EMU to Euro, or Euro to EMU.

MRC converts the transaction to your reporting currency using the appropriate reporting conversion type you specified for the application and operating unit that originated the transaction.

Note: The only exception to the case above is when you specify your own transaction-to-primary currency conversion rate. This case is explained in the next diagram.

Example 1

You receive an invoice for 1,000.00 Australian dollars (AUD) from an Australian supplier. Your organization uses spot rates to account for the invoice in your primary set of books, which is maintained in Canadian dollars (CAD). You use corporate exchange rates to convert amounts to U.S. dollars (USD) for reporting purposes.

Summary of related information:

Transaction currency: AUD
Primary currency: CAD
Reporting Currency: USD
Spot exchange rate (AUD to CAD): 0.9181
Corporate exchange rate (AUD to USD): 0.6409

This is how the invoice will be converted:

Transaction amount: 1,000.00 AUD
Primary amount: 918.10 CAD
(0.9181 * 1,000.00 AUD)
Reporting amount: 640.90 USD
(0.6409 * 1,000.00 AUD)

Transaction Currency Differs from Primary and Reporting Currency and You Specify the Conversion Exchange Rate

The following diagram illustrates the conversion business rules that apply when the transaction currency is different from both the primary currency and the reporting currency, a variable rate relationship exists between the transaction and reporting currencies, and you specify a transaction-to-primary currency conversion rate when you enter the transaction:

Your application converts the transaction to your primary currency using the rate you specify. The conversion rate type will be User in both your primary and reporting set of books.

MRC converts the converted primary currency transaction to your reporting currency using the appropriate reporting conversion type you specified for the application and operating unit that originated the transaction.

Example 2

You receive an invoice for 1,000.00 Australian dollars (AUD) from an Australian supplier. Your contract with the supplier was originally negotiated using prices in Canadian dollars. The exchange rate used at the time of the agreement was 0.8950 (1 Australian dollar = 0.8950 Canadian dollars). This is also the rate specified on the invoice. Your organization uses corporate exchange rates to convert amounts to U.S. dollars for reporting purposes.

Summary of related information:

Transaction currency: AUD
Primary currency: CAD
Reporting Currency: USD
User-specified rate (AUD to CAD): 0.8950
Corporate exchange rate (CAD to USD): 0.6974

This is how the invoice will be converted:

Transaction amount: 1,000.00 AUD
Primary amount: 895.00 CAD
(0.8950 * 1,000.00 AUD)
Reporting amount: 624.17 USD
(0.6974 * 895.00 CAD)

Transaction Currency Same as Reporting Currency

The following diagram illustrates the conversion business rules that apply when the transaction currency is the same as the reporting currency:

When the transaction and reporting currencies are the same, no conversion is needed to your reporting currency. MRC uses the transaction amount as the reporting currency amount.

Your application converts the transaction to your primary currency using one of these conversion rate types:

User-specified: the conversion rate type you specified

EMU Fixed: when both of the currencies are either an EMU currency or the Euro

User: when you specify a transaction-to-primary currency conversion rate.

Fixed Conversion Rate Relationships

When both your transaction and reporting currency is the Euro or an EMU currency, MRC uses the conversion rate type EMU Fixed when it converts your transaction amount to your reporting currency, unless the transaction and reporting currency are the same. In this case, no conversion is necessary.

MRC converts transaction amounts in full compliance with European Commission guidelines that require using the fixed exchange rate between the Euro and each EMU currency.

Example

In February 1999, after the transition period to the Euro begins, you receive an invoice for 1,000 Belgian francs (BEF). Your primary set of books is still maintained in your national currency units (Belgian francs), and you are preparing to convert your operations and financial accounting to the Euro. For this reason, you have created a reporting set of books with a reporting functional currency of Euro and assigned it to your primary set of books.

Summary of related information:

Transaction currency (EMU): BEF
Primary currency (EMU): BEF
Reporting Currency: EUR
Fixed conversion factor (EUR to BEF): 40.7048

This is how the invoice will be converted:

Transaction amount: 1,000 BEF
Reporting amount: 24.57 EUR
(1000 BEF / 40.7048)

See Also

MRC Business Conversion Rules

Conversion Rounding

Assign Reporting Sets of Books

Defining Conversion Rate Types

Overview of Multi-Currency Accounting

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