General Ledger's translation feature (balance level reporting currency) is used to translate amounts from your ledger currency to another currency at the account balance level. Reporting currencies convert amounts from your transaction currency to a reporting currency at the transaction or journal level.
Reporting currencies are specifically intended for use by organizations that must regularly and routinely report their financial results in multiple currencies. Reporting currencies are not intended as a replacement for General Ledger's Translation feature. For example, an organization with a once-a-year need to translate their financial statements to their parent company's currency for consolidation purposes, but no other foreign currency reporting needs, should use General Ledger's standard translation feature instead of reporting currencies.
Another benefit of reporting currencies over General Ledger's Translation feature is that with reporting currencies, you can inquire and report on transaction amounts directly from your subledgers. Translation only applies to General Ledger - it cannot be used to translate transaction amounts in your subledgers.
If you use reporting currencies and have properly initialized your reporting currency's balances, you can report directly from your reporting currency without running Translation. This is because the actual transaction amounts in your reporting currencies have already been converted. As a result, the account balances of your reporting currency are automatically maintained.
For example, to consolidate a subsidiary that maintains a reporting currency using your parent company's ledger currency, you might simply consolidate the reporting currency to your parent ledger, rather than translating, then consolidating the subsidiary's ledger.
Usually, when you compare the results of using amounts from your reporting currency rather than translated amounts, there will be rounding differences in your accounts. Many of these differences arise because:
Translation converts ledger currency amounts to the designated currency. Reporting currencies convert amounts from the transaction currency to the designated currency.
Reporting currencies uses daily rates to convert transaction amounts. Translation uses period or historical rates to translate account balances.
Before you use your currency's amounts in lieu of translating your ledger's amounts, you need to understand and carefully consider:
How reporting currencies work
The country-specific accounting rules and regulations that govern your parent and subsidiary companies
If you use reporting currencies and need to report budget amounts in your reporting currency, you will need to translate the budget amounts in your ledger to your reporting currency.
For example, after translating budget amounts to your reporting currency, you can use FSG to create a budget variance report with three columns:
Translated budget amounts. Your FSG column set can draw these amounts directly from your balance level reporting currency.
Reporting currency actual amounts. Your FSG column set can draw these amounts from your reporting currency.
The variance between budget and actual, expressed in your reporting currency