There are some key concepts about multiple currency support:
- The purpose is to ensure the account balance held in foreign currencies are represented with an accurate value in the base currency for financial reporting. This is required by GAAP.
- The amount needs to be adjusted because of the currency fluctuation.
- Revalue the account balance for balance sheet accounts (Asset and Liability), not the individual transactions.
- Currency revaluation typically happens in the period end, which is also considered as the reporting date.
- The exchange rate to be used is the spot at the end of period although sometime the accounting rule does allow the use of the average rate.
- Revaluation Gain or Lost adjusting entries should be posted to the base currency.
- The account balance amount will be adjusted by the adjusting entries.
- The purpose of translation is to translate the amount available from one base currency to the other base currency.
- Translation is typically part of the consolidation process.
- The account balances from the base currency of a company is 'translated' to the base currency of the parent company.
- The currency exchange rate to be used are the spot rates at the translation date (period-end date) for asset and liability balances and are the average rates for revenue and expense balances