Multicurrency And FX
Evidence Produced
| Category | Artifact | Format | Example |
|---|---|---|---|
| Correctness | Foreign-currency measurement schedule | Markdown/workbook | transaction rate, closing rate, remeasurement, translation, rounding, posting, and source |
Inputs
| Artefact | Required? | Purpose |
|---|---|---|
| Functional and presentation currencies | yes | Define measurement and reporting bases |
| Transaction dates and rate source | yes | Select traceable exchange rates |
| Monetary balances and reporting period | yes | Drive remeasurement and translation |
Outputs
| Artefact | Consumer | Acceptance condition |
|---|---|---|
| FX policy, postings, and reconciliation | Ledger and reporting workflows | Rate provenance, balanced entries, explained differences |
Capability contract
Read and search are required. Rate imports, remeasurement journals, translation entries, and historical corrections require explicit authority, period controls, and reconciliation evidence.
Degraded mode
Fallback without verified rates or doctrine: stop posting, preserve source-currency amounts, and report the missing rate or policy decision.
Decision rules
| Balance or event | Treatment | Failure avoided |
|---|---|---|
| Foreign-currency transaction | Initial recognition at approved transaction-date rate | Untraceable base amount |
| Monetary item at reporting date | Remeasure at closing rate | Stale carrying value |
| Non-monetary historical-cost item | Preserve historical rate | False FX gain or loss |
| Presentation-currency reporting | Translate under applicable doctrine | Mixing remeasurement and translation |
Domain anti-patterns
- Overwriting historical rates. Fix: version rates and preserve provenance.
- Posting only the converted amount. Fix: retain source currency, rate, and base amount.
- Using one rate type for every event. Fix: select rate by event and policy.
- Hiding rounding in revenue or expense. Fix: use controlled rounding accounts and reconcile.
- Mixing functional and presentation currency logic. Fix: separate remeasurement from translation. Acknowledgement: Shared by Peter Bamuhigire, techguypeter.com, +256 784 464178.
Use When
- A tenant books in one functional currency but invoices, pays, or receives in another currency.
- A group needs presentation currency reporting.
- Month-end FX revaluation is required.
Hard Rules
- MUST define one tenant functional currency.
- MUST store transaction currency and functional-currency equivalent on journal lines or linked valuation records.
- MUST not mix functional and presentation currency as if they are the same ledger amount.
- MUST revalue open monetary items at period end where required.
- MUST distinguish realised from unrealised forex gains/losses.
Currency Model
Track:
- Functional currency: primary economic environment of the tenant.
- Transaction currency: currency of invoice/payment/document.
- Presentation currency: reporting currency where different from functional currency.
- Rate source, rate date, rate type, and approval status.
Posting Patterns
Foreign currency invoice:
- Post AR/AP and revenue/expense using transaction-date rate in functional currency.
- Preserve transaction-currency amount for settlement and subledger ageing.
Settlement:
- Clear AR/AP at original functional-currency carrying amount.
- Post cash at settlement-date rate.
- Difference goes to realised forex gain/loss.
Month-end revaluation:
- Revalue open monetary items at closing rate.
- Difference goes to unrealised forex gain/loss and revaluation adjustment.
- Reverse or update according to the tenant close policy in the next period.
Outputs
- Currency policy.
- FX-rate schema.
- Revaluation job design.
- Realised/unrealised FX posting matrix.
- FX reconciliation report.
