Currencies: basic concepts
Definition¶
The currency is the national currency used to execute the transactions and draw up the financial statements.
Currency types¶
Tagetik is a multi-currency system that can manage amounts with different types of currency.
| Type | Description |
|---|---|
| Transaction currency | This is the currency in which the transaction is executed. It may be different from the currency of the company that executed the transaction. |
| Company currency | This is the currency used by the company to draw up and publish its financial statements. |
| Consolidation currency | This is the currency used to produce the consolidated financial statements. This normally coincides with the holding’s company currency. |
Company and transaction currencies are used to insert financial statement amounts, intercompany journals or adjustments. The consolidation currency, on the other hand, is used to convert all the amounts from their original currency during the consolidation process.
Each data item thus always has two amounts:
- Transaction/company amount for the original data
- Company/consolidation amount for the consolidation data.
FX rate types¶
Different types of FX rates may be managed for each currency.
| FX rate type | Description |
|---|---|
| Final FX rate | Year-end FX rates, used for the balance sheet accounts, excluding the equity accounts, which are normally converted at the historical FX rate. |
| Average FX rate | These FX rates are normally used for the P&L accounts. |
| Period average FX rate | A different FX rate for each period of the year. This ensures more precise conversions compared with the average FX rate. |
Currency conversion method¶
To convert an amount from currency A to currency B, the system divides the amount by the FX rate for currency A and multiplies the result by the FX rate for currency B.
Preferred currency¶
The ‘preferred currency’ has the following functions:
- it is the default currency used to display data in the IC matching cockpit
- it is the currency in relation to which FX rates are inserted.
Reference currency¶
Using a ‘reference currency’ allows you to manage data with different units of measurement (for example, thousands and millions) or with a different number of decimal placess, creating ‘derived’ currencies. The derived currencies are all based on a shared reference currency. To calculate the derived currencies, multiply the FX rate of the reference currency by the reference coefficient.