Description
The Custom Foreign Currency Rates feature allows users to manually override exchange rates for multi-currency Journal Entries. A Journal Entry where the posted currency is different from the reporting location's currency in any of the Journal Lines, is considered a multi-currency Journal Entry.
SoftLedger, by default, uses a rate provider to fetch the exchange rates for these currency pairs based on the transaction date.With the Custom Foreign Currency Rates feature, users can manually set the exchange rate for each of the currency pairs used in the Journal Entry.
TABLE OF CONTENTS
Use Cases
Revenue generated in a subsidiary
A parent company has revenue generated in a subsidiary that reports in USD, where they know the conversion of that revenue to the parent company which is CAD.
The USD amount is a certain amount in USD (for example 300 million USD), and a certain amount in CAD (for example 306 million CAD). This means a specific exchange rate had been used, and must be matched within the created transaction. The user can input the required exchange rate from USD to CAD for the transaction.
Transferring cash between banks
Customer is transferring cash from one currency denominated bank account to another currency denominated bank account, for which they have SoftLedger Ledger Accounts to represent each bank account.
For example, the user has a CAD BANK Ledger Account and a USD BANK Ledger Account and they transfer 100k USD to the CAD BANK account, which should amount to 110k CAD. This means a specific exchange rate had been used, and must be matched within the created transaction. The user can input the required exchange rate from USD to CAD for the transaction.
Benefits
This feature benefits any use case where the customer knows the conversion rate and wants to use that specific rate for the conversion. This makes this feature useful for:
- Providing flexibility in financial reporting
- Correcting discrepancies in system-provided exchange rates
- Allowing more accurate representation of Journals based on specific circumstances like:
- Historical rate applications
- Forward contract rates
- Specific agreement rates
- Regulatory or jurisdictional requirements
How to use the feature
When posting/editing a manual multi-currency Journal Entry, the users can click on the Currency icon alongside the Currency selector on the Journal Form to open the Custom Foreign Currency Rates popup. See image below and video above.
Important Considerations
If the posted and reporting currencies are the same, the Custom Foreign Currency Rates button will be disabled.
Using System Rates: Setting 0 for the rate input will use the system rate for this currency pair.
No Negative Rates: The rate input doesn't support negative values.
Examples
Posting an EUR currency Journal Entry in the Global (USD) reporting location
This scenario from image above is posting an EUR currency Journal Entry in a Global (USD) reporting location and therefore gets an input for the EUR to USD rate.
Clicking on the SAVE button saves the rate for this Journal.
Clicking CANCEL will discard the changes made to the rates.
The user can adjust this rate as many times as needed before finally posting the Journal using the SUBMIT button at the bottom right of the form.
On Saving the Journal, notice how the Draft Journals page shows the Amount as EUR 5000, while the Reporting Amount is USD 4000.
The Calculation done here is as follows:
- Posted Amount = 5000 EUR
- EUR to USD Rate = 0.8
- Reporting Amount = 5000 EUR x 0.8 (EUR to USD rate) = 4000 USD
Impact of Journal #1 on the Journal Lines Report
Notice how the Journal Lines Report now shows the Amount as EUR 5000, while the Reporting Amount is USD 4000.
The FX Rate column shows the rate used for the conversion which is the rate set by the user in the Journal Entry.
Impact of Journal #1 on the Default Balance Sheet Report
Default Balance Sheet Report in the Global (USD) reporting location will show the Amount as USD 4000.
Posting an Inter-company Journal Entry with Eliminations
Let's say you have a similar requirement to enter custom currency rates as in the example above, but for an IC Journal Entry that involves two currency pairs rather than one, such as:
- Journal with currency EUR is posted to the Global (USD) reporting location.
- The Inter-company Location set here is Australia (AUD)
The custom currency input on the Journal Entry would display two rate pairs for user input:
SoftLedger API Usage
Refer to the Journal Create and Journal Update to view details on how to use the feature via API.
Each of these endpoints now support a new customForexRates array that takes in the Foreign Currency Rates for the Journal.
customCurrencyRate field isn't removed from the API as of yet but is now deprecated and will be removed in a future release.
Providing a value for the customCurrencyRate field will override the customForexRates array (if passed) and the system will use the value of the customCurrencyRate field to calculate the customForexRates array internally and save the Journal in the new Custom Foreign Currency Rates format.
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