If a business uses multiple currencies, it must correctly account for foreign currency transactions in its financial statements.

In FirstBIT ERP, the company can have the following two special currencies:

• Accounting Currency: Generally, it is the currency in which all the transactions are recorded and the company's financial statements and reports are presented. For each transaction, that uses a currency other than the accounting currency, all the amounts are also calculated in the accounting currency.
• National Currency: The currency of the country where the company's business is located. For all other currencies, the exchange rates are specified with respect to the national currency. For most small and midsize companies, the national currency also serves as the accounting currency.

Note, that in FirstBIT ERP the same accounting currency is used by all the entities if multiple entities are enabled and created.

However, the exchange rates that measure the amounts of foreign currencies in terms of the accounting currency change over time, and the company must periodically revalue its assets and liabilities by using actual exchange rates.

Defining Exchange Rates

You can enter the actual exchange rates for all currencies with respect to the national currency on the Money > Master Data > Currencies form by using the Currency Rates link on the top of the form. For more details, see Adding an Exchange Rate.

In case when accounting currency is not the national currency, you will need to determine the exchange rate of a transaction currency with respect to the accounting currency based on two other exchange rates:

• Exchange rate of transaction currency to the national currency
• Exchange rate of the accounting currency to the national currency.

Example. For a business, located in Dubai, to calculate the transaction amount of 1000 EURO in the accounting currency (which is the US Dollar), you need to multiply the transaction amount by the first rate (4.5 as the exchange rate of EURO in terms of the national currency, AED) and then divide by the second rate (3.6 as the exchange rate of the US dollar in terms of AED). The resulting amount is $1250.

Calculation Options

The gains or losses resulted from fluctuations of exchange rates (exchange differences) can be calculated in the following two modes:

• On posting each new transaction and during the month-end closing process.
• Only during the month-end closing process – the calculations performed for each new transaction during the period will be skipped.

To switch between these calculation mode, you can use the Calculate Exchange Rate Differences on Month Closing Only option on the Administration > Settings > Accounting form.

To include this calculation in the month-end closing process, you can select the Calculate Exchange Rate Differences option on the Accounting > Service Tools > Month-End Closing form. You can review the results of the calculation and corresponding journal entries in the generated Month-End Closing document when you click the button. For more information on month closing, refer to Month-End Closing Service Tool.

During month-end closing process, balances of the cash accounts that are maintained in foreign currencies are revalued in the accounting currency by using the exchange rates on the date of the month closing and compared to their balances in the accounting currency on the last revaluation date - any differences are recorded as exchange rate differences.

For each document with open balance in a foreign currency (in the Accounts Payables and Receivables), the document amount is revalued based on the exchange rate of the foreign currency with respect to the accounting currency on the date of month end, and any gain or loss is determined as the difference in the amounts in the accounting currency on the month-end date and on the transaction date.

Exchange differences for transactions that were paid for during the period are calculated on the month end date.

Also, unpaid salaries in foreign currencies are revalued using the exchange rates in effect on the month end date.

Unpaid employee expense reports in foreign currencies and advances paid to the employees for their business expenses are revalued as well.

If the Calculate Exchange Rate Differences on Month Closing Only option is not selected on the Administration > Settings > Accounting form, the exchange rate differences are calculated additionally during the period as follows:

• For each new foreign currency transaction, the amounts are also recorded in the accounting currency by using the exchange rate effective on the transaction date. If this calculation is initiated for instance by an Invoice or Invoice Received, no exchange differences are calculated for the particular document. However, simultaneously, all the foreign currency transactions associated with the related contract, balances of GL accounts (involved in the transaction) are revalued based on the actual rate, and this date becomes the last foreign currency revaluation date for the transactions that were adjusted.

• If the calculation is initiated by an outgoing or incoming payment, for instance Cash Receipt or Cash Payment, the amounts of exchange differences are calculated for the particular document if the exchange rate on the date of payment differs from the rate on the date of original transaction (sales or purchase). Again, simultaneously, all the foreign currency transactions associated with the related contract, balances of GL accounts (involved in the transaction) are revalued based on this rate, and this date becomes the last foreign currency revaluation date for the transactions that are adjusted.

Accuracy of Calculation

If the total amount of gain or loss (incurred due to exchange rate differences) is in the interval (-0.005, +0.005) no gain or loss is registered.

If the resulting sum is equal or greater than 0.005, the sum is posted to the default account selected in the Gains on Exchange Differences column on the Accounting > See Also > GL Accounts by Default form.

If the resulting sum is equal or less than -0.005, the sum is posted to the default account selected in the Losses on Exchange Differences column on the Accounting > See Also > GL Accounts by Default form.

(переоцениваются ли налоговые счета в валюте учета?)