Regulatory bodies around the world may require different ways for translating different types of balances. However, there are very specific rules to follow in currency translation.
IMINDQ FINANCIAL CONSOLIDATION TRIAL
The currency translation process will translate each individual trial balance into the reporting currency. Also it is important to note that the exchange rates used should reflect the local currency used in an entity to the reporting currency. The reporting currency can be any currency but it should reflect which currency is needed for reporting. This way when all of the balances are combined it is not really adding apples and oranges together. In order to have consolidated results we must first standardize all of these different trial balances into 1 currency. Those subsidiaries trial balance are most likely in different currencies. In any given business, there could be multiple subsidiaries that operate in all different areas of the world. Currency translation is the process of standardizing all of the data from each individual trial balance that maybe in all different currencies into 1 common reporting currency. So now that we have the entire source data, isn’t that enough? Well, another step that needs to be taken into consideration is currency translation. Just remember the trail balance is the base level information that is needed to the consolidation process. As long as all of the necessary information is captured, it does not matter where the trail balance comes from. But that’s okay, a trail balance is just financial information can be directly input into the BPC system. However, not all entities that exist may be set up in a general ledger system.
Normally information is aggregated up to the level that is needed for consolidations in the business warehouse and transferred over to BPC all of the more detailed information is left out of the dataset.
The general ledger may have detailed information such as what bank account number is associated with a cash balance, but this information is not necessary for consolidation. The general ledger system would then normally go through a data warehouse(in SAP’s world that would that would be BW) and feed into the BPC system all relevant information needed that every single bit of information is needed for consolidations. Trail balance of each entity normally comes from the general ledger system. A trial balance holds all of the detailed information recorded on the entities’ book and records and is the ingredients needed to perform consolidations. The most basic information needed for legal consolidation is each entity’s trail balance. When we look at financial consolidations we need to look at a few different areas: Entity Trial Balance: Whether that is to provide a consolidated report to external regulators (10K and 10Q for US regulators), internal management teams, or even other groups within the accounting department (i.e.tax team to calculate tax reserves), financial consolidation is a complex set of rules set forth in accounting standards by regulators and internal accounting standards by regulators and internal accounting groups of any given company. One of the reasons why we need consolidated financial results is to track how a company is performing and provide that information to people. Let us get a good understand of exactly what this means and why we need consolidated financial results. One of the main functionalities and appeal of SAP BPC 10.0 is the capability to perform legal financial consolidations.
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