What are Currency and Currency Type Exceptions and When Do I Need Them
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What are Currency and Currency Type Exceptions and When Do I Need Them

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Article summary

When currency conversion is performed, different types of accounts need to be converted at different rates. For example, Income Statement accounts are usually converted using an AVG (average monthly) rate whereas Balance Sheet accounts are typically converted using an EOM (End of Month) rate.

To address each conversion need, create exchange rate type members, which you assign to accounts. Exchange rates are defined for each exchange rate type. The table below has different accounts and account types with varying exchange rate types.

Account


Account Type


Exchange Rate Type


Sales

Income Statement

AVG

Traveling Expenses

Income Statement

AVG

Cash

Balance Sheet

EOM

Creditors

Balance Sheet

EOM

Equity

Balance Sheet

Historical

Fixed Assets

Balance Sheet

EOM

Currency exceptions come into play when the exchange rate type must be different for a specific subsidiary. For example, you might have a subsidiary experiencing hyperinflationary conditions resulting is fixed assets needing to be converted at a Historical exchange rate versus an EOM rate. The table below shows the same accounts and account types provided in the table above WITH a currency exception defined for company 2's Fixed Asset account.

Account

Account Type


Exchange Rate Type


Company 2


Sales

Income Statement

AVG

 

Traveling Expenses

Income Statement

AVG

 

Cash

Balance Sheet

EOM

 

Creditors

Balance Sheet

EOM

 

Equity

Balance Sheet

Historical

 

Fixed Assets

Balance Sheet

EOM

Historical


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