Exchange rate adjustment

This routine is used at the time of period close. It is used for adjusting foreign liabilities to the base equivalent using the latest exchange rates. This function is run interactively. The program reviews all outstanding invoices for the month and adjusts the exchange differences to the unrealized exchange fluctuations account. If the invoice was paid that month, it will post the difference to realized exchange fluctuations account.

The adjustment is the difference between the EOM rate and the payment rate entered when payment is made. TMSAP/EXC-GALO is used by the exchange rate adjustment program. 

TMSAP/EXC-ACCT contains the General Ledger account to which translation fluctuations are posted, that is the difference between what is posted to the profit and loss account and the Balance Sheet account. This calculation is performed when the invoice is entered.

TMSGL/FCTA is used when reporting in a foreign currency. This control file contains the General Ledger account to which exchange translation variances are posted. In order to convert the ledger to various foreign currencies, the following must be done.

• The applicable General Ledger accounts must be flagged for automatic conversion in the General Ledger masterfile. Balance sheet accounts are converted using the EOM rate, profit & loss accounts are converted using the average rate.
• The total of all account balances in the foreign currency is reverse posted to the foreign translation account number.
• After month end processes have been run, the foreign currency conversion programs are run. This converts all flagged accounts to auto conversion.

Following is an example using two (2) accounts established in TMSAP/EXC-GALO exchange currency gains/losses accounts.

• One for Unrealized Gain/Loss
• One for Realized Gain/Loss
  1. The invoice is entered for $1000.00 (Trade Currency) $1666.67 (Base Currency) at exchange rate 0.600.
  2. The exchange rate has been changed (A/P masterfile) to 0.500.
  3. The exchange rate adjustment option has been taken (Period Close). This has generated a debit adjustment journal for $333.33 (Base Currency) to the Unrealized Gain/Loss Account.
  4. The exchange rate has been changed to 0.550.
  5. The exchange rate adjustment option has been taken. This has generated a credit adjustment journal for $18.182- (Base Currency) to the Unrealized Gain/Loss Account.
  6. The payment has been made $1000.00 (Trade Currency) $2,500.00 (Base Currency) for the invoice at exchange rate 0.400.
  7. The exchange rate adjustment option has been taken. This has generated a credit adjustment journal for $151.51- (Base Currency) to the Unrealized Gain/Loss Account and a debit adjustment journal for $833.33 to the Realized Gain/Loss Account.

Following is an example when using one (1) account for Unrealized and Realized Gain/Loss Account established in TMSAP/EXC-GALO exchange currency gains/losses accounts.

1. The invoice is entered for $100.00 (Trade Currency) $142.86 (Base Currency) at exchange rate 0.700.
2. The Exchange rate has been changed (A/P masterfile) to 0.680.
3. The Exchange rate adjustment option has been taken (Period Close). This has generated a debit adjustment journal for $4.20 (Base Currency) to the Unrealized Gain/Loss Account.
4. The Payment has been made $100.00 (Trade Currency) $166.67 (Base Currency) for the invoice at exchange rate 0.600.
5. The Exchange rate adjustment option has been taken. This has generated a debit adjustment journal for $19.61 to the Realized Gain/Loss Account.