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Slide notes: We are at Journal Processing, and we are going to look at Forex Positioning. In other words, we are looking at the different methods available to process the Linked Currency Accounts, the Foreign Exchange Amounts and Exchange Conversion rates.

What is a Journal?

Slide notes: Let's refresh our understanding of a Journal first. A Journal is always a Transaction event with at least 1 Debit and 1 Credit in the General Ledger, and possibly multiple Debits and / or Credits. Even when we post Receivables, Payables or other Sub Ledgers, there are always 1 or more Control Accounts in the General Ledger that are affected.

Forex Accounts

Slide notes: A Forex Account is a Financial Account in the General Ledger or in a Sub Ledger, and is an Account that has Linked Currency Management in addition to the base Accounting Currency of the system. For example, if our base currency is EURO, then any Accounts that are US Dollar are linked Currency Accounts.

FOREX Accounts have 2 Balances

Slide notes: A Linked Currency Account is at all times, in real-time, managed with dual balances. In this example we can see that an Account with FOREX has a Local Currency Balance and a Linked Currency Balance, while a normal Local Currency Account has no Forex Balance.

Copy of Forex Accounts

Slide notes: When a Transaction is posted, and any Linked Currency Account is affected, then an Exchange Rate conversion takes place on the spot. That means that if posted only with a Local Currency Amount, then a conversion is performed for the Forex equivalent, and if posted only with a Forex Amount then a conversion is performed to calculate the Local Amount. If both amounts are present, then the Exchange Rate is calculated based on the 2 Amounts. So, although Accounts with Linked Currencies can also be re-valuated in terms of Local Value at selected times, it is correct to say that any Linked Currency has an equivalent Forex Value at any point in time, and especially that a Transaction event like a Journal will retain, permanently, the Exchange Rate at which it is performed.

Posting Forex Accounts

Slide notes: Where does the Exchange Rate come from? It can be read automatically from the Currency Exchange Register to pick up the latest Exchange Rate for the selected Currency, or it can be captured, or it can be derived if both the Local and Forex Amounts are stated.

Copy of Posting Forex Accounts

Slide notes: Journal options in IES include Automatic Exchange Rate conversion, Exchange Rate sensing and also Direct Positioning. Automatic conversion means that the Rate is taken from the Currency Register, while Exchange Rate sensing will only offer the Rate from the Currency Register as a default but allow the User to change it for the current Transaction. Direct Positioning means the direct stating or capturing of both Local and Forex Amounts, or else one of those 2 plus the Exchange Rate to calculate the other.

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Slide notes: To demonstrate how we apply Forex Positioning, we will do some examples, starting with a Single Leg Journal that includes Tax and Forex.

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Slide notes: On this Journal, the expense is to a Local Account, but the Bank Account to credit will be a Forex Account.

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Slide notes: The moment we enter the Forex Account Number, the system wants to know what the Amounts or Exchange Rate will be. We can specify only 1 Amount, and in that case the system will use the Exchange Rate from the Currency Register to calculate the other Amount. Or we can specify both Amounts, and then the Exchange Rate is implied and calculated accordingly. Or we can specify 1 Amount i.e. Local or Forex, plus the Exchange Rate to use to calculate the other Amount.

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Slide notes: Since we specified only the Local Amount, the system uses the Exchange Rate from the Currency Register and then calculates the Forex Amount.

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Slide notes: If we check the Exchange Rate for US Dollar on the Exchange Register right now, then of course we can see where the rate of 7 comes from.

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Slide notes: When we post this Transaction, it is posted with the Exchange rate positioning that we have applied. In many cases, this is sufficient, but there is an interesting aspect that is relevant in some countries where a Tax portion of the main Amount has to be converted at a Rate that could be different from the Rate used for the main Transaction Amount.

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Slide notes: If we drill the Transaction that we have just posted, then we can see that the main Local Amount of 150.00 has been converted at an Exchange Rate of 7, which was obtained from the Currency Register.

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Slide notes: However, the system has also automatically posted a Tax or VAT Transaction based on the main transaction, which was a taxable transaction. And we can see that this VAT transaction was converted at 7.3 rather than 7. Why is this so?

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Slide notes: If we have another look at the Exchange Register for US Dollar, then we see that there is a rate of 7.3 specified for Tax conversion. If this is not specified, then of course Tax conversion will be at the same rate as the main Transaction, but in this case it is specified and therefore applied. So that is one way to deal with Tax Amounts that have to be converted at a different rate from what we call the ruling P&L Rate for conversion.

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Slide notes: If we are dealing with lots of Transactions in a day that regularly attract varying or different Exchange Rates for different Journals, then we can and will still use the Exchange Register, but we can additionally apply Exchange Rate sensing on top of that. This Exchange Rate sensing is managed from our Currency Management options, and in this example we can see that none of the options are active at the moment.

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Slide notes: However, if we switch all of these options on, or selectively, then the effect will be experienced when we use the Journal processing. So we will now return to the same Journal option that we have already used, and then we will notice how it is affected by the Exchange Rate sensing.

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Slide notes: This Journal is similar to our previous example.

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Slide notes: And, as before, we are prompted for Amounts and Exchange Rate.

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Slide notes: And when we post this Journal, then we are prompted additionally, and unlike the previous example, for an Exchange Rate for the Tax conversion.

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Slide notes: In this case, the system still offers the default Rate for Tax conversion from the Currency Register. If we want to use that same Rate, then we can just choose Next, but if we want to apply a different Rate for this transaction, then we can input the Rate to use.

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Slide notes: Next we will look at an example of a Multi Leg Journal, with Tax and with Forex.

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Slide notes: On this Journal Type, we select the Currency we are dealing with, and all Accounts posted on this Journal will be for this Currency.

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Slide notes: Note that we have a Tax entry on the Journal.

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Slide notes: And of course we can have multiple Accounts but in this example we only show 1 Account to debit and 1 Account to credit.

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Slide notes: As soon as we choose to post the Journal, then the system prompts for the Primary Exchange Rate to use on this Journal, to convert amounts in the Linked Currency to the Local Currency. This prompt is appearing because Exchange Rate Sensing for Multi Journals is switched ON. If it was OFF, then we would not be prompted and the Rates would be used directly from the Currency Exchange Register. Now we can still use the default Rate from the Register, or else we can specify a different Rate.

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Slide notes: And likewise, because Exchange Rate Sensing is ON and because there is a Tax component on this Journal, we are also prompted with a Rate for converting the Tax. If there is no Tax on the Journal, then we will not be promted for this Rate.

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Slide notes: Next, we will look at an example of a Multi Journal that allows a mix of GL, Receivables and Payables, and a mix of Local and Forex Currency Accounts, all on the same Journal.

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Slide notes: The primary Currency for this Journal is Local Currency, but Linked Currency Accounts may also be posted, and the Account we are posting on line 1 is such a Forex Linked Account.

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Slide notes: As soon as we capture an Amount entry for a Forex Linked Account, then we are prompted for Exchange Rate details.

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Slide notes: The Amount just captured may be considered a Local or a Forex amount, and that is the User's choice. That means that our input values may be either in Local or Foreign Currency for any capture line.

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Slide notes: And the system will convert to the other Currency based on the selected Exchange Rate.

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Slide notes: Next, we look at a Multi Journal with multi positioning.

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Slide notes: On this Journal Type, we can post a mixture of GL Accounts, and Payable and Receivable Accounts, and we can include a mix of Local Currency and Forex Accounts. Not only can we include multiple different Currencies, but we can also include different Exchange Rates for the same Currency on different Journal Lines.

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Slide notes: Furthermore, we can choose whether we want to position by Rate or by Amount. What does that mean? It means that if we choose by Rate, then each Amount is separately converted at a selected Rate. If we have a case where rounding affects conversion by Rate result in Amounts that may be not exact enough, i.e. a cent up or down, then we can choose to convert by Amount, and in that case, we will have the exact Amount in the selected Currency as we want it, and the Rate will be calculated automatically.

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Slide notes: Our current selection of positioning is now by Rate. When we capture an Amount for a Linked Currency Account, then we are prompted for an Exchange Rate.

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Slide notes: We may use the default Rate from the Exchange Rate Register, or we can input a specific Rate to use.

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Slide notes: We can still specify the Amount in either Local Currency or Forex, and choose which it was, then the system will convert the Amount to the other Currency.

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Slide notes: Since this Journal displays Amounts in Local Currency, we now see the result of the 100.00 that was captured as 700.00, i.e. after it has been converted at the selected Rate.

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Slide notes: We now change our example to position by Amount.

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Slide notes: And when we capture an Amount now, it will be considered a Local Amount, and we will be prompted for the Forex Amount.

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Slide notes: When we input the Forex Amount, then the system will calculate what is the Exchange Rate, but the Forex Amount will be retained exactly as captured and will not be affected by rounding at conversion.

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Slide notes: Just for information, we can see the position being stated as the Forex Amount that was captured.

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Slide notes: From these examples, we can see that by planning our settings and Journal options according to our current needs, that any Forex Positioning method can be accommodated on the IES Journals.