Notes on Translating Owners' Equity Accounts

General Ledger translates owners' equity accounts in accordance with SFAS #52 and IAS 21, using historical rates or amounts.

Suggestion: Historical rates tend to be more precise than period-end rates with respect to owners' equity accounts. Therefore, if you translate your owners' equity accounts without defining a historical rate, General Ledger creates a message in the log file stating it used a calculated or period-end rate to perform translation. If this message is created in your log file, we suggest that you define a historical rate and retranslate your balances using that rate.

See: Automatically Assigned Rate Types.

Translating Retained Earnings Account

The retained earnings account at the beginning of a fiscal year is not translated like other accounts in GL. It is translated using the following formula:

Beginning translated retained earnings balance in new fiscal year =

(Sum of all translated revenue balance at the end of prior year - )

Sum of all translated expense balance at the end of prior year +

Translated ending retained earnings balance at the end of prior year.

If you translate owners' equity accounts using the YTD rule, then in the first period of each new fiscal year, General Ledger populates a historical rate with rate type Calculated for the retained earnings account in the historical rates table. It is the ratio of the beginning translated retained earnings account balance to the beginning ledger currency retained earnings account balance. In the case of the YTD rule, user - defined historical rates or amounts are not rolled forward across fiscal years for the retained earnings account. If you translate owners' equity accounts using the PTD rule, General Ledger does not calculate the historical rate for the retained earnings account.

Restating Previously Translated Balances

If you change the translation rule for your owner's equity account, you should restate your previously translated balances. Equity accounts will be translated using the new rule for new translations only. Previously translated equity account balances will not change.

To choose the translation rule to use for owners' equity accounts:

  1. Review the setting for the profile option GL: Owners Equity Translation Rule. There are two possible settings:

    PTD: Owners' equity is translated using the Period-to-Date rule.

    YTD: Owners' equity is translated using the Year-to-Date rule.

  2. Have your system administrator set the profile option to the method your organization uses for translating owners' equity.

Note: If you do not maintain historical rates in your ledger, General Ledger will create them for each period for which you translate your owners' equity accounts, using: - The assigned Period - average rates if you use the PTD rule. - The assigned Period - end rates if you use the YTD rule.

To restate your previously translated owner's equity balances after switching the translation rule:

  1. Purge the old translated balances for each period to be restated.

  2. Change the GL: Owners Equity Translation Rule profile option to the desired setting.

  3. For each period to be restated, use the Historical Rates window to delete the rates used to translate owners' equity accounts, as follows:

  4. Run translation. Your owners' equity balances will now be translated using the new rule.

    Note: Review the historical rates and amounts you have defined to determine if these are still applicable with the change in equity translation rule.