Translation of Financial Statements: Process Activity

The following activity will walk you through the process of translating financial statements into a foreign currency.

Story

Suppose that after the configuration of a translation definition, the chief accountant of SweetLife Fruits & Jams has decided to translate account balances from the base currency (USD) into a foreign currency (EUR) by using the configured translation definition. Acting as a SweetLife accountant, you have to translate the account balances for December 2023 and January 2024.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Enable/Disable Features (CS100000) form, the following features have been enabled:
    • Standard Financials, which provides the standard financial functionality
    • Multibranch Support, which supports multiple branches in your instance of MYOB Acumatica
    • Multicompany Support, which supports multiple companies within one tenant.
    • Multicurrency Accounting, which enables multicurrency operations in the system
  • On the Companies (CS101500) form, the SWEETLIFE company has been defined.
  • On the Branches (CS102000) form, the HEADOFFICE branch of the SWEETLIFE company has been created.
  • On the Chart of Accounts (GL202500) form, the 32000 (Retained Earnings) and 33000 (Net Income) accounts have been created.
  • On the Currency Rate Types (CM201000) form, the SPOT rate type has been defined.

Process Overview

In this activity, you will prepare a translation for December 2023 on the Prepare Translation (CM501000) form and release it on the Translation Worksheets (CM304000) form. You will then review the balances of the reporting ledger on the Account Summary (GL401000) form.

Next, you will prepare a translation for January 2024 on the Prepare Translation form, release it on the Translation Worksheets form, and analyze how the system updated the balances.

System Preparation

Before you begin performing the steps of this activity, do the following:

  1. Launch the MYOB Acumatica website with the U100 dataset preloaded, and sign in as an accountant Anna Johnson by using the johnson username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, click the Business Date menu button, and select 12/31/2023 from the calendar.
  3. On the Company and Branch Selection menu on the top pane of the MYOB Acumatica screen, make sure that the SweetLife Head Office and Wholesale Center branch is selected. If it is not selected, click the Company and Branch Selection menu button to view the list of branches that you have access to, and then click SweetLife Head Office and Wholesale Center.
  4. As a prerequisite activity, make sure that the multicurrency accounting functionality has been configured as described in Multicurrency Functionality: Implementation Activity and Configuration of Rate Types and Rates: To Configure Rates.
  5. As a prerequisite activity, make sure that you have created a translation definition as described in Translation Definitions: Implementation Activity.

Step 1: Preparing a Translation for December 2023

To prepare a translation for the 12-2023 period, do the following:

  1. Open the Prepare Translation (CM501000) form.
  2. In the Selection area, specify the following settings:
    • Translation ID: EUR

      Here you specify the translation definition to be used for the translation.

    • Fin. Period: 12-2023

      This is the financial period for which the translation will be performed.

    • Currency Effective Date: 12/31/2023

      This is the effective date of the currency exchange rate to be used for the translation.

    • Description: Translation to EUR

    The table displays the currency rates that will be used in the translation. These are the rates of different rate types that are effective on the translation date.

    Tip:
    When you are performing a translation in a production environment, make sure that you have completed the translation for the previous periods. If any periods were skipped, you will see incorrect balances of the accounts that are translated by the PTD Balance method and have nonzero PTD balances for the skipped periods.
  3. On the form toolbar, click Create Translation.

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

Step 2: Reviewing the Balances and Releasing the Translation

To review the translated balances and release the translation, do the following:

  1. While you are still on the Translation Worksheets (CM304000) form, review the prepared translation worksheet.

    The system has translated the account balances by using the exchange rates of the appropriate type and the rules of translation specified in the translation definition. The Source Amount column shows the amount to be translated: the PTD balance for the accounts translated with the PTD Balance method, and the ending balance for the period for the accounts translated with the YTD Balance method. The Translated Amount column shows the source amount that the system converted by using the specified currency rate as follows:

    • For the accounts translated with the YTD Balance method, this is the account balance at the end of the period in the reporting ledger.
    • For the accounts translated with the PTD Balance method, this is the account period-to-date balance for the period in the reporting ledger.

    The Transaction Debit Amount and Transaction Credit Amount columns show the amount in which the account will be debited or credited in the translation batch to get the needed balance. This is the first translation that you have performed in the EUROTRANS reporting ledger. (You created this ledger in Translation Definitions: Implementation Activity.)

    Thus, all the nonzero account balances were processed, and the debit and credit amounts equal the translated amounts. The Orig. Translated Amount column shows account balances (PTD balances or ending balances, depending on the selected translation method) in the reporting ledger before the translation. Currently, the column shows 0.00 for all the accounts, because before the translation, all account balances were equal to zero.

    The system translates balances of different accounts by using different currency rates (as the translation definition specifies), so the total of the translated assets and expenses does not match the total of the translated liabilities and incomes. To make the Debit Total equal the Credit Total in the translation worksheet, this discrepancy is posted to the Translation Gain/Loss account specified for the reporting currency. This amount is not translated, and thus the Currency Rate for this row is 1.00. The Debit Total and Credit Total equal the Control Total.

  2. On the form toolbar, click Release to release the translation worksheet.

    The system generates a transaction and posts it to the EUROTRANS reporting ledger.

  3. Click the Translation Batch Number link in the Summary area.
  4. On the Journal Transactions (GL301000) form, which opens, review the generated transaction.

    The amounts from the Transaction Debit Amount and Transaction Credit Amount columns, which you have reviewed on the translation worksheet, were copied into the Debit Amount and Credit Amount columns, respectively. Notice that you can review the batch only in EUR, because it is the currency assigned to the EUROTRANS reporting ledger.

    Tip:
    If after a translation was performed for the period, you have posted some new transactions to the actual ledger in this period, you have to perform the translation one more time; subsequent translations for the same period will adjust the account balance if the account balance has changed.

    If you have used the wrong currency rate in the translation, change the rate to the correct one and redo the translation.

    The EUROTRANS reporting ledger now contains account balances translated to EUR, so that you can use it for preparing financial statements and other reports in the EUR currency for the 12-2023 period.

Step 3: Reviewing the Balance of the Reporting Ledger

To review the balances of the EUROTRANS reporting ledger, do the following:

  1. Open the Account Summary (GL401000) form.
  2. In the Selection area, specify the following settings:
    • Company/Branch: HEADOFFICE - SweetLife Head Office and Wholesale Center (inserted by default)
    • Ledger: EUROTRANS
    • Financial Period: 12-2023
    • Show Currency Details: Cleared
  3. Review the table. Account balances have been translated to EUR and recorded to the reporting ledger. The amounts in the Ending Balance column are the same as those in the Translated Balance column of the translation worksheet that you released.

Step 4: Preparing and Releasing a Translation for January 2024

To prepare a translation for the 01-2024 period, do the following:

  1. In the info area, set the business date to 1/31/2024.
  2. Open the Prepare Translation (CM501000) form.
  3. In the Selection area, specify the following settings:
    • Translation ID: EUR
    • Fin. Period: 01-2024 (inserted automatically)
    • Currency Effective Date: 1/31/2024 (inserted automatically)
    • Description: Translation to EUR

    Last Fin. Period shows the period for which the most recent translation was performed (12-2023).

    Important:
    If you have prepared a translation for a period and have not released it, you will not be able to prepare a translation for the next period until you release or delete the prepared translation on the Translation Worksheets (CM304000) form.
  4. On the form toolbar, click Create Translation.

    The system prepares the translation and displays it on the Translation Worksheets form. The system prepares the translation that adjusts the results of the previous translation. Notice that not all accounts were processed during this translation: The system processes only accounts with the PTD Balance method that have transactions in the translation period, and accounts with the YTD Balance method that have nonzero balances. Because the SPOT rate at the end of 12-2023 and at the end of 01-2024 differs, the system also translates all assets and liabilities.

    The Transaction Debit Amount and Transaction Credit Amount columns display the adjusting amounts that will be posted to the accounts in the reporting ledger. Thus, the ending balances for the accounts translated with the YTD Balance method and the PTD balances for accounts translated with the PTD Balance method become equal to the amounts in the Translated Amount column.

  5. On the form toolbar, click Release.
  6. Open the Translation Details (CM651500) report form.
  7. On the Report Parameters tab, specify the following settings:
    • Financial Period: 01-2024
    • Translation Number: 000002
  8. On the form toolbar, click Run Report.
  9. Review the report. It lists the accounts whose balances were updated with the translation.

Step 5: Reviewing the Balance of the Reporting Ledger

To review the balance of the reporting ledger updated by the translation, do the following:

  1. Open the Account Summary (GL401000) form.
  2. In the Selection area, specify the following settings:
    • Company/Branch: HEADOFFICE - SweetLife Head Office and Wholesale Center (inserted by default)
    • Ledger: EUROTRANS
    • Period: 01-2024
    • Show Currency Details: Cleared
  3. Review the form. The account balances were updated with the results of the translation in 01-2024. At the end of the 2023 financial year, the system automatically transferred the net income from the YTD Net Income account to the Retained Earnings account. Therefore, the beginning balance of the 32000 (Retained Earnings) account is €27,682.37, and the balance of the 33000 (Net Income) account at the start of 01-2024 is €0.00. The ending balance of the 33000 account for the 01-2024 period was automatically calculated from the balances of the income and expense accounts, and is now –€37,776.80.