Current versus Historical Exchange Rates
Foreign currency transactions are initially recorded at the rate of exchange at the date of transaction. However, these amounts need to be adjusted subsequently. Therefore, historical and current exchange rates can be set up to assist in calculating any exchange differences that may arise. If applicable, setting up these rates will also assist with the translation of your financial statements.
Working Papers calculates the current and historical rate as follows:
Current
When Current is selected as the foreign exchange rate, the foreign exchange rate of the current active period is applied to the year-to-date balance. Previous rates are ignored. The default foreign exchange rate for Balance Sheet accounts is Current.
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Example
If the current active period is May in a fiscal year that runs from January 1 to December 31, then the foreign exchange amount in May is calculated as follows:
Year-to-date balance x Foreign Exchange rate for May
Historical
When Historical is selected as the foreign exchange rate, the foreign exchange rate of each period is applied to each period balance and then all twelve periods are totaled. The default foreign exchange rate for Income Statement accounts is Historical
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Example
If the current active period is May in a fiscal year that runs from January 1 to December 31, then the foreign exchange amount in May is calculated as follows:
(Opening balance x Opening FX rate) +
(balance change for January x January FX rate) +
(balance change for February x February FX rate) +
(balance change for March x March FX rate) +
(balance change for April x April FX rate) +
(balance change for May x May FX rate)
