Multi-Currency Accounts Payable

Accounts Payable (AP) > Accounts Payable Overview

Multi-Currency Accounts Payable

This section describes multi-currency or foreign currency Accounts Payable Processing. The Stream V system is completely foreign currency enabled and it automatically posts realized exchange rate gains and losses to the general ledger.

During Accounts Payable Invoice Entry, AP invoices may be created in both local or “house” currency, and in foreign currencies. Each Vendor must be assigned a default currency, but invoices in different currencies can be processed for the same vendor company. As invoices are processed, the vendor currency is defaulted into the AP Entry program, but this vendor default currency can be changed on an invoice by invoice basis as required. Each vendor can have invoices in multiple different currencies open at the same time if necessary.

Each accounts payable invoice is created with one currency. The currency of each AP invoice is stored in a currency field in the AP invoice or “Register” record. The historical exchange rate used for the invoice (the exchange rate used when the invoice was created), is also stored in each AP invoice record. The amounts in each AP invoice are stored in the currency of the invoice. For example: An invoice for 1000 Swedish Krona is created with the Swedish Krona invoice amount of 1000 and the exchange rate in the invoice is used to determine the local or house value of the invoice when valuation reports are run or postings are made to the general ledger.

The AP balance in the general ledger is maintained in local or house currency. All open accounts payable reports convert the AP invoice information to house currency using the historical exchange rate in the invoice. Some reports also total the foreign currency values at the end of the report. This information and the current exchange rate for each currency can be used to estimate and book unrealized exchange gains or losses for financial reporting purposes.

The following section describes multi-currency AP invoice processing. For additional information on the AP procedures described in this section, please refer to the Procedures or Program Reference sections of the AP manual.

• When a vendor is selected in the AP invoice entry program the system defaults the invoice currency to the default currency for the selected vendor. If the invoice is associated with a purchase order and the PO has been specified during entry, the PO currency is used as the transaction currency for the invoice.

• The user can modify the currency to be used on a specific invoice by changing the currency field in the AP Invoice Entry program to the correct value. This would not be appropriate if the invoice is tied to a purchase order as the invoice and PO must be in the same currency.

• The AP invoice amounts are entered into the system in the currency appropriate for the invoice (i.e. if the invoice is in euro, the euro amounts are entered). Charges are allocated to the appropriate accounts as per the normal procedure outlined in the AP invoice entry documentation.

• If the Invoice is associated with an inventory receipt or vendor shipment, the Three Way Matching program will only allow the operator to tag receipt or vendor shipment transactions that are in the same currency as the invoice. The tagged total shown in the Three Way Matching program is in the currency being processed to allow the operator to identify any differences or variances between the vendor invoice and purchase order amounts.

• When the operator is done allocating the AP invoice and saves the transaction, the system updates both the general ledger and the AP Register file. An AP Register or invoice record is created and the amounts in the invoice are stored in the AP invoice currency. A journal entry is also created and this journal entry contains both the local and foreign currency amounts associated with the transaction. The appropriate general ledger account balances are also updated. The general ledger balances are maintained in house currency, based on the exchange rate used during invoice entry. The foreign currency amounts in the journal entry are used for reference purposes and are not used when generating financial statements. Rounding variations are compensated for by the creation of a special journal entry line that is posted to a foreign currency rounding account (please see GL documentation for details).

• When an accounts payable invoice is partially or completely paid, the system uses the exchange rate stored in each invoice (the historical rate) and the most current rate in the system for the currency being processed to determine the amount of the Realized Foreign Currency Gain or Loss due to the transaction. The system reduces the accounts payable control account based on the historical exchange rate in the invoice and the amount of the invoice being paid. The cash account used to pay the invoice is adjusted based on the most current rate for the currency being processed (what the foreign currency is worth when the payment transaction is processed) , and the difference between these two amounts (in local currency) is posted to the Realized FC Gains and Losses account in the GL automatically.

• At the end of an accounting period, or when required, the Open Accounts Payable or the Aged Accounts Payable report can be produced. These reports output the local value of the open accounts payable invoices at the time they are run. These reports list the invoice amounts in local currency based on the historical rate stored in each open invoice. Options in the reports also allow you to output foreign currency details. These options can be used to print the foreign currency amounts of each invoice, and to produce subtotals at the end of the report listing the total of the invoices in each currency. The foreign currency totals also indicate the current local value of each foreign currency total based on the most current exchange rate in the system for the currency. The current value of the foreign accounts payable invoice can be used to book an accrual entry for any “Unrealized Exchange Rate Gains or Losses”. This accrual entry would normally be posted at the end of the period and reversed in the next period. This entry would be made as a manual journal entry when required and it is not automatically made by the system.

Purchasing and AP Processing