11/26/2018 Document 104939.

GLTTRN: General Ledger Translation (Doc ID 104939.1) To Bottom

PURPOSE

The purpose of this document is to explain how foreign currency translation works in Oracle General Ledger.

SCOPE & APPLICATION

This document looks at the following areas:

Why translation is required

What the translation process does
How it can be reported
How to reconcile it

Translation is not the same as Multiple Reporting Currencies functionality, nor is it the same as journal or subledger reporting currencies in Release 12:

MRC (from R11) creates converted information at the transaction level to allow reporting and inquiry directly on transactions.
Translation works on balances only. It does not work on individual transactions.

The use of MRC is not covered by this bulletin.

GENERAL LEDGER TRANSLATION

What is Translation?

Translation converts balances from your functional currency to a foreign currency. You can translate both actual and budget balances. If you have average balanc
processing enabled, the system can translate average balances as well.

Why is it needed?

Translation is frequently used to prepare financial reports for consolidation into global financial statements. It is also used in highly inflationary economies to
produce reports in a more stable currency.

When do you run translation?

Translation should be run at the end of the period, after all transactions have been processed and reconciled.

How does the system translate balances?

"If you have defined historical rates or amounts in the Historical Rates window, General Ledger will select one of two amounts that is used to arrive at a translated
balance for your account: Asset/Liability: The historical amount becomes the YTD translated balance for the account. If historical rate is used, it is applied against
the ledger currency YTD balance.

Revenue and Expenses are translated according to the GL Translation: Revenue/Expense Translation Rule Profile setting (PTD or YTD). If this is not set then
Revenue and Expenses are translated by multiplying the PTD balance by the Period Average Rate

Owners equity accounts are translated by multiplying the YTD balance by the Period End Rate, unless you define Historical Rates for these accounts (in which case
it will use the Historical Rate). If you are not specifying Historical rates or amounts, you can set the profile option GL: Owners Equity Translation Rule to a value o
YTD or PTD. If set to YTD, then translation will use the Period End Rate. If set to PTD, then translation will use the Period Average Rate.

Setup Considerations for Translation

In order to use translation functionality, you need to:

Enable the currencies (Setup, Currencies, Define)

Enter daily rates (Setup, Currencies, Rates, Daily)
Enter period rates (Setup, Currencies, Rates, Period) (Not applicable in Release 12)
Enter historical rates (Setup, Currencies, Rates, Historical)

Running translation for the first time

You cannot translate in the first period in your calendar.

The first Consolidation must be performed as YTD not PTD for two reasons:

1. PTD will not generate a correct Opening Balance figure.

2. The Consolidation Journal maybe unbalanced by the amount of the CTA adjustment if there are Accounts defined with a Historic Conversion Rate.
Example
Current Exchange Rate US$ 2 = 1€
Historic Exchange Rate for Owners US$ 1.75 = 1€

Opening Balance
|Base | |Translated |
|Dr |Cr |Dr |Cr
RE Account |150 | |86 |
P & L Accounts | |400 | |200
L/A Accounts |250 | |125 |
| | | |
Total |400 |400 |211 |200

So because of the historic rate being used there is a difference in the Translated Opening Balance of 11€

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Period Movement
|Dr |Cr |Dr |Cr
RE Account |0 | |0 |
P & L Accounts | |30 | |15
L/A Accounts |30 | |15 |
CTA Acc | | | |11
|30 |30 |15 |26

This difference is adjusted by the 11 in the CTA Account

This gives
Closing Balance
|Dr |Cr |Dr |Cr
RE Account |150 | |86 |
P & L Accounts | |430 | |215
L/A Accounts |280 | |140 |
CTA Acc | | | |11
|430 |430 |226 |226

Subsequent Translation
Period Movement
|Dr |Cr |Dr |Cr
RE Account |0 | |0 |
P & L Accounts | |20 | |10
L/A Accounts |20 | |10 |
CTA Acc | | | |0
|20 |20 |10 |10

Closing Balance
|Dr |Cr |Dr |Cr
RE Account |150 | |86 |
P & L Accounts | |450 | |225
L/A Accounts |300 | |150 |
CTA Acc | | | |11
|450 |450 |236 |236

So the journal for the first period will be done on a YTD basis

|Dr |Cr
RE Account |86 |
P & L Accounts | |215
L/A Accounts |140 |
CTA Acc | |11
|226 |226

And the Journal for the second period if done on a PTD Basis will be

|Dr |Cr
RE Account |0 |
P & L Accounts | |10
L/A Accounts |10 |
CTA Acc | |0
|10 |10

This is in error for two reasons:

1. The closing balance for RE Accounts the period in the Parent Set of Books would be 0 and not 86 as it should be.
2. The journal is unbalanced by the 11 going to the CTA account

Running Translation

Navigate: Currency --> Translation (in Release 12, translation can also be submitted from the Submit Request form)
Decide whether you are translating actual or budget balances. If you want to translate all balancing segments, check the All check box, otherwise enter the
balancing segment you want to translate. Choose your target currency and the period to translate. If you are translating a budget, you will have to enter a source
and target budget.

Reports and inquiries

In Release 11.5 and earlier, the only report available is the Trial Balance - Translation.You can use Account Inquiry to inquire on balances, but you will not be able
to drill down to transaction detail, as this is not translated. Only balances are translated.

In Release 12, translated balances are held as balance level reporting currencies. You can report and inquire on those balances. The use of reporting currencies is
outside the scope of this article.

How do I check that the translation has been carried out correctly?

Reconciliation of the Cumulative Translation Adjustment (CTA) Account:

1. Take the total of your P&L (Revenue and Expense) accounts and multiply this amount by the period average rate defined.
2. Take the total of assets and liabilities and multiply this amount by the period end rate.
3. Take the total of your retained earnings and use the historical amount or multiply by historical rate (whichever way you have defined it).
4. Add 1,2 and 3 together. This should equal the amount in your translation adjustment account.
5. Make sure no other entries have been made to the account. If there has been, they would have to be reversed in order to reconcile the amount.

What is the rate adjustment column on the Trial Balance - Translation?

A particular translation trial balance shows the net adjustment as a result of the most recent translation. This will be automatically posted to the CTA.

Why does the total in the rate adjustment column not equal the adjustment to be made to the CTA?

When you translate balances, the amount posted to the CTA is the net amount necessary to ensure that the translated trial balance is in balance for the year to
date. This calculation is performed each period, and the amount posted to the CTA is the net adjustment required to ensure that the accounts remain in balance.

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The rate adjustment column shows the net adjustments arising as a result of restating the functional balance to the translated currency at the current period end
rate. This only affects balance sheet accounts, as the previous period YTD on balance sheet accounts is also restated using the period end rate.

RELATED DOCUMENTS
General Ledger User Guide Release 11i
General Ledger User Guide Release 12

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