Today we’ve released the new Foreign Exchange Revaluation Journals Wizard for all our multicurrency customers.

The function enables you to revalue the balances of your foreign bank, customer and supplier (vendor) accounts using the month end exchange rates.

Adjusting journals for the value of the revaluation will be posted to the relevant control accounts and the unrealised gains/losses account.

You can access the function from the ‘General’ >>> ‘GL Journals’ top level menu.

Why do I need to Revalue Foreign Accounts?

A Balance Sheet is designed to reflect the position of the company at a particular point in time.

Foreign Exchange (FX) balances that were previously posted and are still outstanding are likely to be worth a different amount if the FX exchange rates have fluctuated since the transactions were posted.

For example, a supplier account balance of €5,000 Euro converts to £3,023.98 GBP at a monthly average exchange rate of 1.653450 Euro to GBP. However if at month end the exchange rate has risen to 1.752908, the €5,000 is now worth only £2,852.40.

This represents a reduction in the amount owing of £171.58, which is an unrealised gain to your company, i.e. if the company paid the supplier at that point in time, it would have to pay £171.98 less than when the original invoices were posted.

While a fluctuation in exchange rates may not be permanent, it usually represents a trend in the rate. It is good accounting practice to recognise gains/losses as they arise rather than waiting until the transaction is paid and recognise the total realised gain/loss in that period.

In addition the real value of the balance sheet values of the debtors/AR, creditors/AP or bank accounts in base currency should be recognised at each month end.

Therefore, it is prudent to revalue any outstanding FX accounts on a period by period basis.

Using the Revaluation Wizard

The best way to start with this function is to read the online help documentation. This provides a step by step guide together with screenshots.

The process itself is straightforward and consists of the following steps:

• Choose whether to revalue foreign bank, customer and supplier accounts (or all three)
• Select the financial period into which the journals should be created
• Record the period end exchange rates which will determine the amount by which each account should be revalued
• Generate the revaluation journals to adjust the base currency balance of each account to the revalued amount

The journals are posted as reversing journals to accrue for a loss/gain as if the account was settled right now. This automatic reversal after the period end allows you recalculate the unrealised gain/(loss) each period based on the most up to date exchange rates.

If you need any further help or have any questions contact your local support representatives.