EE Foreign Currency Revaluation Impact on Chart of Account Configuration
Posted on: May 23, 2018 | By: Andy Vitullo | QAD Financials
Foreign currency revaluation, also known as foreign currency remeasurement, is a generally accepted accounting principle (GAAP) that prescribes a month end accounting process for transactions recorded in an alternate currency other than the general ledger base currency.
This task described by GAAP is as follows:
· Required only when functional currency is different from currency used to maintain books.
· Monetary assets and liabilities are revalued using the current rate.
· Nonmonetary items are revalued at historical rate.
· Revenues and expenses are revalued using the average rate.
QAD’s Enterprise Edition FX Revaluation programs in general will find open transactions (open payables and receivables) created in an alternate currency. The program will compare the exchange rate used at creation of the open transactions and compare that exchange rate to the end of month rate. The calculated difference is then booked as an end of month journal entry and automatically reversed in the subsequent month.
Therefore, your chart of account design will allow for a single trade receivable account and a single trade payable account. Your chart of accounts will no longer require alternate currency accounts to enable the revaluation.