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Corporate Performance Management


Producing consolidated group accounts that include foreign currency subsidiaries with translation of assets and liabilities and P&L accounts at different exchange rates – can be quite complex.

Consolidating Group Accounts

Under the Generally Accepted Accounting Principles (GAAP) standard Foreign currency consolidation is performed using the Current Rate Method. This involves:

So what’s the problem?

This presents a reporting challenge for your ERP because the monthly numbers for your P&L accounts are handled significantly differently to the cumulative numbers of the Balance Sheet.

The monthly P&L accounts are translated from the original currency using the average exchange rate for the period, whilst the Balance Sheet accounts are translated at the closing rate.

Essentially meaning, all accounts on the Balance Sheet are restated every month, leading to gains and losses solely due to exchange rate fluctuations.

How FastClose can help?

To get to a Consolidated Group Trial Balance for each month, we need a result for each nominal that is effectively a period movement.

For the P&L nominals this can be done simply by copying them,

Finally, the translated trial balance is summed to give you the translation (exchange rate) gain or loss.

This exchange translation variance can then be added into your P&L and Balance sheet using FastClose hierarchies to give an accurate picture of your financial situation.

Gosh! That sounds quite complicated!

Well indeed it is; there is quite a lot of subtlety and order in the way that the math has to be organised and executed.

And there can be further complexity where certain historical calculations are required to enable fixed translated numbers for Retained Earnings, Share Capital, and Goodwill for the year, not forgetting inter-company eliminations that also need to be considered.

But here’s the thing – FastClose ships with a pre-built solution that handles all of this. Once your chart of accounts has been imported and configured – it does the rest.

But some of my Companies are outside of the main ERP system

That can happen particularly where your business has grown by acquisition. If that is the case, there will likely be numerous companies with different ERP systems that require consolidation.

However these companies can be set up in the main ERP, to mirror the source data and their respective monthly trial balances posted.

In addition it is likely that some degree of mapping of nominals will be required between the different chart of accounts.

As time passes, as is common after acquisitions, a gradual transition can occur, moving these companies to run using the main ERP the complexity will reduce.

FastClose clients

FastClose significantly streamlines our statutory and management consolidation processes across 10 companies and four currencies. Its real-time integration with the Epicor database assures the accuracy and dependability of our results.
John Rothery
Finance Director, Sportech Plc