Multi-Currency Exchange Handling in Elliott

Release Date: 08/30/2017

Multi-Currency Exchange Handling in Elliott

Introduction

Elliott is not designed as a multi-currency package. However, there are common practices you can use that have been adopted by Elliott users to perform multi-currency control.

According to the GAP standard, General Ledger should be in one single currency. Since Elliott does not support currency conversion at each sub-module level like AR, AP, COP (Sales Order & Invoicing) and PO, the conversion to single currency needs to be done at the General Ledger level. This document is intended to show you how Elliott users may use Elliott for multi-currency control purposes with certain currency adjustment transactions to be entered in GL at the month end.

If you intend to use POs with the multi-currency option, we are then assuming you are using the “Standard” cost method.

Chart of Account Setup Requirement

You must set up separate cash, receivable, payable and PPV accounts for each foreign currency. In addition, for each sales account, you should set up a foreign currency sales adjustment account. Finally, you should set up one “Foreign Currency Gain or Lost” account for each currency. The following is list of these accounts:
Foreign Currency Cash Account: For each foreign currency cash account, set up a corresponding account in Elliott's chart of accounts. For example,
  • “Checking Acct# 123456 - Euro”
  • “Money Market Acct#654321 – Euro”
  • “Checking Acct# 456789 – Canadian” 
The amount in this account will be the foreign currency amount that should match with your bank statement.
Cash Currency Adjustment Account: For each foreign currency cash account, you should setup up a corresponding adjustment account in Elliott chart of account. For example,
  • “Checking Acct# 123456 Currency Adjustment - Euro”
  • “Money Market Acct#654321 Currency Adjustment – Euro”
  • “Checking Acct# 456789 Currency Adjustment – Canadian” 
These account numbers should immediately follow their corresponding “Foreign Currency Cash Account.”  It would be ideal to define the subtotal level in the chart of accounts so the foreign cash account and cash adjustment account will be added up together to produce a subtotal to represent their true home currency value at month end. The entry to this account will be done at the month end (period end) so you can produce your financial statement in a single currency. The adjustment entry you make to this account will be reversed at the beginning of lthe next month (period) and therefore, the adjustment is typically entered as accrual journal entries.
Foreign Currency Accounts Receivable Account: For each foreign currency, set up a corresponding AR account in Elliott's chart of accounts. For example,
  • “Accounts Receivable – Euro”
  • “Accounts Receivable – Canadian”
AR Currency Adjustment Account: For each corresponding foreign currency AR account, set up a corresponding adjustment account. For example,
  • “AR Currency Adjustment – Euro”
  • "AR Currency Adjustment – Canadian”
These account numbers should immediately follow their corresponding “AR Currency Adjustment Account.”  It would be ideal to define the subtotal level in the chart of accounts so the foreign AR account and AR currency adjustment account will be added up together to produce a subtotal to represent their true home currency value at month end. The entry to this account will be done at the month end (period end) so you can produce your financial statement in a single currency. The adjustment entry you make to this account will be reversed at the beginning of next month (period) and therefore, the adjustment is typically entered as accrual journal entries.
Foreign Currency Accounts Payable Account: For each foreign currency that you have payable needs, set up a corresponding payable account. For example,
  • “Accounts Payable – Euro”
  • “Accounts Payable – Peso”
AP Currency Adjustment Account: For each foreign currency AP account, you need to set up a corresponding adjustment account. For example,
  • “AP Currency Adjustment – Euro”
  • “AP Currency Adjustment – Peso”
These account numbers should immediately follow their corresponding “AR Currency Adjustment Account”. It would be ideal to define the subtotal level in the chart of accounts so the foreign AP account and AP currency adjustment account will be added up together to produce a subtotal to represent their true home currency value at month end. The entry to this account will be done at the month end (period end) so you can produce your financial statement in a single currency. The adjustment entry you make to this account will be reversed at the beginning of next month (period) and therefore, the adjustment is typically entered as accrual journal entries.
PPV (Purchase Price Variance) Account: For each foreign currency that you may need to use for purchasing purpose, you need to set up a corresponding PPV account. For example,
  • “PPV – Euro”
  • “PPV – Peso”
Currency Gain or Lost Account: For each foreign currency that you may use through out the system, you need to set up a corresponding Currency Gain or Lost Account. For example,
  • “Currency Gain or Lost – Euro”
  • “Currency Gain or Lost – Canadian”
  • “Currency Gain or Lost – Peso”

Sample Chart of Accounts for Currency Control

Order to Receivable

Customer File Maintenance

The sales amount associated with a customer will be in the customer’s currency. Therefore, when you view a customer that you sell to in Euros, the sales PTD and YTD will show in Euros. On the other hand, the cost PTD and YTD will be shown in your home currency. This may cause some confusion. It may be desirable to develop sales analysis through tools like Crystal Report and apply the currency exchange rate based on certain fields in the Customer File.

It is important that certain fields are set up in the Customer File to differentiate currency. The following are the fields that should be set up:
  • Accounts Receivable Account: This field affects the GL distribution when the Invoice or A/R cash receipt is posted. Different currencies should have different AR accounts, and therefore, customers with different currencies should have different AR accounts assigned.
  • Collector: This field is related to Aging Report by Collector. It is desirable to have an AR Aging Report that you can use to reconcile with the GL AR balance. The AR Aging Report by Collector will be a good candidate for this purpose if you set the Collector field to represent currency. The  Collector field is a 3-digit field. You may consider using a two-digit country code to represent the currency: US (for US $), EU (for Europe $).
  • Customer Type: This field affects Elliott Pricing and Sales Analysis by Customer Type Report. This field is also widely available through many other areas so the operator can quickly identify a customer using certain currency. Since in Elliott Customer Order Processing, the unit price entered into the order should be based on the customer’s currency, we should define pricing by customer type/item (Price code 3) so the order entry will display the price in the customer’s currency.
  • Invoice Form: If you enable the multi-invoice form for different currency purposes, then you can define a different invoice form for each currency, and in the customer file maintenance you can indicate which invoice form (currency) to use with this customer. On the different invoice form for each currency, you can define literal information like “Price is in Euro Dollar.”  However, if you need to print an Order Acknowledgement with this literal, then you should use the Note feature to accomplish this instead.

Use Notes to Print Currency Info on Invoice

As an alternative to using different invoice forms, you can simply define notes into the Elliott Customer File to be printed on the invoice. To do that, you need to do the following:
  1. Define a note type like “INV” to indicate this note type will be printed on the invoice.
  2. Add a note with note type “INV” to the customer that will be using foreign currency with one line text like “Price is in Euro dollar.”
  3. In the Global Setup, Note Setup, indicate that the Customer Note will be printed on the COP document without copying.
This may be an easier way to handle currency literal printed on the invoice rather than using the multiple invoice form. This is especially true if you wish to print an order acknowledgement with this literal as well since there is no multiple order acknowledgement form capability in Elliott.

Pricing Issue

It may be nice for the order entry to come up with the right pricing for different currency automatically. The best way to accomplish this is to set up pricing by customer type where the customer type is the currency code (price code 3).

The drawback to doing this is if the currency changes frequently, then the pricing you set will be constantly fluctuating and that will require lot of maintenance effort.

Alternately, you can enter the price and let the system calculate the home currency unit price, and then manually convert it to the proper foreign currency amount.

Invoice Printing with Currency Notes

The Sales Order will be entered in the customer’s currency. However, on the invoice or order acknowledgement form, the literal needs to be printed --  like “Price is in Euro dollar.”  This can be accomplished through defining Notes in the Customer File and printed on the invoice.

Aging Report

Keep in mind that the amount in the aging report contains multiple currencies and, therefore, the grand total won’t make any sense. If you assign the proper currency code to the Customer Collector field, then the Aging Report by Collector will provide you a more sensible report. Each collector subtotal represents the currency total and you can use that to compare with GL A/R balances for that currency. The grand total won’t make any sense so just ignore it.

Cash Receipt

Cash receipt is received in the original currency like Euro, Canadian…etc. Make sure the cash account you are receiving to is the appropriate currency cash account. The AR account will be picked up from the Customer File automatically.

Inventory Management

Average Cost, Last Cost in foreign currency. Standard Cost in home currency.

Purchasing to Payable

When you place a purchase order with a vendor using foreign currency, the purchase price on the PO should be the foreign currency price. At the time of the receiving, the system will default to the foreign currency price and update the item last cost and calculate item average cost. If the same item will be purchased from two different vendors with two different currencies, then this will create major confusion. We are assuming this condition won’t happen.

In addition, we assume you will use the Standard Cost method. When it is time to determine the standard cost, the user will use the average cost and last cost, and apply the projected currency exchange rate to calculate the standard cost. The standard cost will be in your home currency and, therefore, all inventory standard costs in your item will use the same currency. The total inventory value on the Stock Status Rreport will reflect your home currency value as well.

There should be a flag in Item Master setup to indicate the currency code for the item.
During the time of PO receiving, since you will be using the Standard Cost method, the standard cost (your home currency) will be used to distribute to the Inventory and Receiving Accrual account.

General Ledger Operation

According to the GAP standard, you can’t have multiple currencies in the General Ledger. However, the amount in each A/R, Cash and A/P currency account are in the foreign currency amount. We can use the number in this account directly to produce the financial statement.

Therefore, at the end of each month, we need to make the adjustment transactions. The following is an example:

Let's say at the month end, we have:
  • 30,000 in A/R US$ account
  • 20,000 in A/R Euro account 
  • 15,000 in Cash UD$ account
  • 10,000 in Cash Euro account
  • 6,000 in A/P US$ account
  • 5,000 in A/P Euro account
  • 50,000 in Sales
To reconcile the A/R account, you can print out the Aging Report by Collector.

To reconcile the Cash account, you can match your bank statement.

To reconcile the A/P account, you can print the A/P Open Item Report, which will give subtotals by A/P Account.

Since there is no separate Sales account for each currency, you will have to figure out the sales for each currency by using the Sales Report.  Let's say, according to the Sales Report, that there is a $30,000 sales amount in US$ and a $20,000 sales amount in Euro, and that the total amount matching with the GL sales is $50,000.

If at the end of the month, the currency exchange rate for Euro is 1 Euro = $1.20 US. Then, we need to make the following adjustment to GL:

Account

Accrue

Dr

Cr

A/R Euro Adjustment

Yes

4,000

 

Euro Currency Gain or Lost

Yes

 

4,000

Cash Euro Adjustment

Yes

2,000

 

Euro Currency Gain or Lost

Yes

 

2,000

A/P Euro Adjustment

Yes

1,000

 

Euro Currency Gain or Lost

Yes

 

1,000

Sales Euro Adjustment

N

 

4,000

Euro Currency Gain or Lost

N

4,000

 


Notes:
PPV Issue – PPV contains both the currency variance and purchase price variance.
AP Voucher Entry – Enter the right AP account. Long-term, associate vendor with AP account (by using Vendor Type?)

EMK:

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