When consolidating multiple entities with different currencies into a common reporting currency a balance sheet discrepancy can occur which is reported in Calxa balance sheet reports as a Currency Translation Difference.
Why is there a Translation Difference?
When consolidating a balance sheet the exchange rate used to translate each entities base currency to the reporting currency is the closing rate as at the reporting period. However, there are some special accounts or cases where a different exchange rate is used.
The following accounts use a different exchange rate to the remainder of the balance sheet. The Currency Translation Difference accounts for the discrepancy caused by using different exchange rates.
Current Year Earnings
Current Earnings will match the year-to-date profit which is calculated using the monthly average exchange rates.
Retained Earnings is calculated using the closing rate from the prior financial year. This ensures the Retained Earnings amount reports the same value for the full financial year.
Accounts with Fixed Exchange Rate Overrides
You can set accounts to always use a fixed exchange rate. For example, if you need to record a balance sheet item using the historical method, then you can apply a fixed exchange rate to match the historical rate. See the Currencies & Exchange Rates help article for more details.
Currency Translation Difference Reports
Since the differences can arise from a number of accounts and from multiple different organisations you may need to report on this overall difference in more detail and reconcile the calculations. The following 2 reports can be used for this purpose.
Currency Translation Difference Report
The purpose of this report is to show additional calculation logic for the accounts that can cause a discrepancy. For each account we calculate the following values.
Actuals: this is the actual value reported on Balance Sheet reports.
Using Closing Rate: this is the value that would be reported if the closing exchange rate used by the remainder of the balance sheet was applied.
Currency Translation Difference: the difference caused by each account is listed separately and totalled to the same overall amount reported on the consolidated balance sheet.
Currency Translation Comparison Report
The purpose of this report is to provide a side-by-side comparison of each entity's contribution to the overall translation difference. You'll note the Consolidated Group value here matches the Currency Translation Difference column in the above report. The additional columns however represent each entity in the consolidated group and the underlying difference caused by that company's conversion to the reporting currency.