Consolidated Financial Statement: Performing a Translation

The following activity will walk you through the process of creating a translation definition and performing the translation of the balances of SweetLife Canada in U.S. dollars.

Story

Suppose that at the end of January 2023, the managers of SweetLife Fruits & Jams need to review the consolidated financial statement of SweetLife (the parent company) and SweetLife Canada (a subsidiary in Canada). Because the companies use different base currencies—U.S. dollars for SweetLife and Canadian dollars for SweetLife Canada—the account balances of SweetLife Canada need to be translated into USD first.

Further suppose that SweetLife's chief accountant has decided that balances have to be translated based on the following rules:

  • Assets and liabilities should be translated by using the current exchange rate.
  • The Capital account should be translated by using the historical exchange rate.
  • The Retained Earnings account should be translated by using the current exchange rate.
  • Revenues, expenses, gains, and losses should be translated by using the average exchange rate for the period that is used for translation.

Acting as Kimberly Gibbs, an employee who has access to both companies, you need to upload transactions for the 01-2023 period and translate the account balances of SweetLife Canada for January 2023 into USD (the base currency of SweetLife Fruits & Jams).

Configuration Overview

In the U100 dataset, the following configuration task has been performed to prepare the system for this activity to be performed:

On the Enable/Disable Features (CS100000) form, the Multibranch Support, Multicompany Support, Customer and Vendor Visibility Restriction, Multicurrency Accounting, and Multiple Base Currencies features have been enabled.

Process Overview

In this activity, you will first enable the Translation of Financial Statements feature on the Enable/Disable Features (CS100000) form. On the Currencies (CM202000) form, you will specify the GL accounts for the CAD and USD currencies. On the Currency Rate Types (CM201000) form, you will create the SPOT, AVG, and HIST rate types that will be used in translation. On the Currency Rates (CM301000) form, you will create a currency rate for each rate type for the date when the translation has to be performed. On the Ledgers (GL201500) form, you will create a reporting ledger that will be used for translation. On the Journal Transactions (GL301000) form, you will upload the transactions of SweetLife Canada for the 01-2023 financial period.

On the Translation Definition (CM203000) form, you will create a translation rule based on the settings you have created in this activity. You will then prepare a translation on the Prepare Translation (CM501000) form and release the translation on the Translation Worksheets (CM304000) form. Finally, you will review the GL batch generated by the system on the Journal Transactions (GL301000) form.

System Preparation

To prepare the system, do the following:

  1. Launch the MYOB Advanced website, and sign in to a company with the U100 dataset preloaded. You should sign in as Kimberly Gibbs by using the gibbs username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the MYOB Advanced screen, click the Business Date menu button, and select 1/31/2023 on the calendar.
  3. On the Company and Branch Selection menu, on the top pane of the MYOB Advanced screen, select the SweetLife Canada branch.
  4. In the company to which you are signed in, be sure that you have configured the SweetLife Canada company, as described in Multiple Base Currencies: Implementation Activity, which is a prerequisite activity.
  5. On the Invoices and Memos (AR301000) form, be sure that you have processed an invoice in CAD, as described in Documents in Different Base Currencies: To Process an AR Invoice, which is a prerequisite activity.

Step 1: Enabling the Needed Feature

To enable the Translation of Financial Statements feature, do the following:

  1. Open the Enable/Disable Features (CS100000) form.
  2. On the form toolbar, click Modify to make it possible to change the set of selected features.
  3. In the Advanced Financials group of features, select the Translation of Financial Statements check box.
  4. On the form toolbar, click Enable to enable the selected feature.

Step 2: Specifying the Needed GL Accounts for CAD and USD

To specify the GL accounts for the CAD and USD currencies, do the following:

  1. Open the Currencies (CM202000) form.
  2. In the Currency ID box, select CAD.
  3. On the GL Accounts tab, specify the following settings.
    Element Value
    Realized Gain Account 42010 - Realized Gain CAD
    Realized Loss Account 82010 - Realized Loss CAD
    Unrealized Gain Account 84000 - Unrealized Gain/Loss Currency
    Unrealized Loss Account 84000 - Unrealized Gain/Loss Currency
    Revaluation Gain Account 84010 - Cash Account Revaluation Gain/Loss CAD
    Revaluation Loss Account 84010 - Cash Account Revaluation Gain/Loss CAD
    Translation Gain Account 27001 - Translation Gain/Loss
    Translation Loss Account 27001 - Translation Gain/Loss
    Rounding Gain Account 83100 - Rounding Gain/Loss
    Rounding Loss Account 83100 - Rounding Gain/Loss
  4. On the form toolbar, click Save to save your changes.
  5. In the Currency ID box, select USD, and on the GL Accounts tab, specify the following settings for USD.
    Element Value
    Realized Gain Account 83000 - Realized Gain/Loss Currency
    Realized Loss Account 83000 - Realized Gain/Loss Currency
    Unrealized Gain Account 84000 - Unrealized Gain/Loss Currency
    Unrealized Loss Account 84000 - Unrealized Gain/Loss Currency
    Revaluation Gain Account 83200 - Cash Account Revaluation Gain/Loss
    Revaluation Loss Account 83200 - Cash Account Revaluation Gain/Loss
    Translation Gain Account 27001 - Translation Gain/Loss
    Translation Loss Account 27001 - Translation Gain/Loss
    Rounding Gain Account 83100 - Rounding Gain/Loss
    Rounding Loss Account 83100 - Rounding Gain/Loss
  6. On the form toolbar, click Save to save your changes.

Step 3: Creating Rate Types for Translation

To create the currency rate types that the system will use for translation, do the following:

  1. Open the Currency Rate Types (CM201000) form.
  2. On the form toolbar, click Add Row, and in the added row, specify the following settings:
    • Rate Type ID: AVG
    • Description: Monthly Average Rate
  3. On the form toolbar, click Save to save your changes.
  4. Click Add Row again, and specify the following settings for the added row:
    • Rate Type ID: HIST
    • Description: Historical Rate
  5. On the form toolbar, click Save to save your changes.

Step 4: Adding Currency Rates for the Rate Types

To add the currency rates for the rate types that will be used in translation, do the following:

  1. Open the Currency Rates (CM301000) form.
  2. In the Summary area, specify the following settings:
    • To Currency: USD
    • Effective Date: 1/31/2023
  3. On the Currency Rate Entry tab, click Add Row on the table toolbar, and specify or verify the following settings for the added row:
    • From Currency: CAD
    • Currency Rate Type: SPOT
    • Currency Effective Date: 1/31/2023 (inserted automatically)
    • Currency Rate: 1.2974
    • Mult./Div.: Divide
  4. Click Add Row on the table toolbar, and specify or verify the following settings for the added row:
    • From Currency: CAD
    • Currency Rate Type: AVG
    • Currency Effective Date: 1/31/2023 (inserted automatically)
    • Currency Rate: 1.3157
    • Mult./Div.: Divide
  5. Click Add Row on the table toolbar, and specify or verify the following settings for the added row:
    • From Currency: CAD
    • Currency Rate Type: HIST
    • Currency Effective Date: 1/31/2023 (inserted automatically)
    • Currency Rate: 1.2609
    • Mult./Div.: Divide
  6. On the form toolbar, click Save to save your changes.

Step 5: Creating a Ledger for Translation

To create a ledger that will be used for translation, do the following:

  1. Open the Ledgers (GL201500) form.
  2. On the form toolbar, click Add New Record, and in the Summary area, specify the following settings:
    • Ledger ID: CONSSLCAN
    • Description: Consolidation Ledger for SLCANADA
    • Type: Reporting
    • Currency: USD
  3. On the Companies tab, click Add Row on the table toolbar, and select SLCANADA in the Company column.
  4. On the form toolbar, click Save to save your changes.

Step 6: Uploading Transactions for the 01-2023 Period

To upload the list of transactions for the 01-2023 period in the SLCANADA company, do the following:

  1. Open the Journal Transactions (GL301000) form.
  2. On the form toolbar, click Add New Record, and in the Summary area, specify or verify the following settings:
    • Module: GL (inserted by default)
    • Transaction Date: 01/31/2023 (inserted automatically)
    • Post Period: 01-2023 (inserted automatically)
    • Branch: SLCANADA (inserted automatically)
    • Ledger: SLCANADA (inserted automatically)
    • Currency: CAD
    • Description: Transactions for 01-2023
  3. On the table toolbar, click Load Records from File.
  4. In the File Upload dialog box, which opens, select the SWEETLIFE_Canada_Transactions_01-2023.xlsx file, and click Open. Click Upload in the dialog box.
  5. In the Common Settings dialog box, which opens, leave the default settings and click OK.
  6. In the dialog box that opens, leave the default settings, and click OK.
  7. On the form toolbar, click Remove Hold, and then click Release to release the transaction.

Step 7: Creating a Translation Rule

To create a translation rule that will be used for translating the balances of SLCANADA in USD, do the following:

  1. Open the Translation Definition (CM203000) form.
  2. On the form toolbar, click Add New Record.
  3. To create a new definition, specify the following settings in the Summary area:
    • Translation ID: CADTOUSD
    • Source Ledger ID: SLCANADA - SLCANADA Actual Ledger
    • Destination Ledger ID: CONSSLCAN - Consolidation Ledger for SLCANADA
    • Branch: SLCANADA (inserted by default)
    • Description: SLCANADA: Translation to USD
    • Source Currency: CAD (inserted automatically based on the selected ledger)
    • Destination Currency: USD (inserted automatically based on the selected ledger)
  4. Click Add Row on the table toolbar, and specify the following settings for the added row:
    • Account From: 10000
    • Account To: 28000
    • Translation Method: YTD Balance
    • Rate Type: SPOT
  5. Click Add Row on the table toolbar, and specify the following settings for the added row:
    • Account From: 30000
    • Account To: 30000
    • Translation Method: YTD Balance
    • Rate Type: HIST
  6. Click Add Row on the table toolbar, and specify the following settings for the added row:
    • Account From: 32000
    • Account To: 32000
    • Translation Method: PTD Balance
    • Rate Type: SPOT
  7. Click Add Row on the table toolbar, and specify the following settings for the added row:
    • Account From: 40000
    • Account To: 90000
    • Translation Method: PTD Balance
    • Rate Type: AVG
  8. On the form toolbar, click Save to save your changes.

Step 8: Performing a Translation of Balances into USD

To perform the translation of SweetLife Canada balances into USD, do the following:

  1. Open the Prepare Translation (CM501000) form.
  2. In the Selection area, specify or verify the following settings:
    • Translation ID: CADTOUSD
    • Fin. Period: 01-2023 (inserted automatically)
    • Currency Effective Date: 1/31/2023 (inserted automatically)
  3. On the form toolbar, click Create Translation.

    The system prepares the translation worksheet and displays it on the Translation Worksheets (CM304000) form.

  4. On the form toolbar of the Translation Worksheets form, click Release.
  5. In the Translation Batch Number box in the Summary area, click the link with the reference number to review the generated transaction on the Journal Transactions (GL301000) form.