Description

Consolidation Rates are used in SoftLedger tenants that have multiple reporting currencies used within their SoftLedger Location Structure, meaning one Location reports in one currency (e.g. USD), while another Location reports in a different currency (e.g. EUR). If all Locations in the SoftLedger tenant have the same reporting currency, these Consolidation Rates are not required.

• When Consolidation Rates are Required
  • Consolidated Reporting
    • Multi-Currency Location Example
  • End of Year Closing Journal Entries
• What are Consolidation Rates
  • Rate Types
    • Spot Rate
    • Weighted Average Rate
    • Historical Rate
• How these rates are used in calculations
  • Calculation Example
• How to set up Consolidation Rates
  • Populating Rates
  • Editing Rates
  • Resetting Rates
  • Deleting Rates
  • Populating Rates directly from Consolidated Reports

When Consolidation Rates are Required

Consolidated Reporting

Consolidation Rates are required when subsidiary Locations report balances in one currency, and need to translate that balance up to a parent Location that reports in another currency. 

Multi-Currency Location Example

Take the following entity structure as an example:

• Global: 1,000 USD
• Europe: 1,000 EUR
• Australia: 1,000 AUD

To view the balance of this Ledger Account at the consolidated parent level in USD as the reporting currency, requires the EUR and AUD balances to be converted to USD. The conversion rates used here are called the Consolidation Rates.

When there is a consolidation option for a report, there will be a Consolidated toggle:

If the Location selected has subsidiary Location that report in another currency, running the consolidated report, will require input of Consolidation Rates to be set, or else the report will show an error like below:

End of Year Closing Journal Entries

Consolidation Rates are also used when booking end of year Retained Earnings Journal Entries. For multi-entity structures that report in different currencies, the consolidation rates are required when closing the fiscal Accounting Year. These rates are used when calculating the difference to book Retained Earnings at each currency pair.

What are Consolidation Rates

Consolidation Rates are end of period rates used to convert the financial data from the child entity reporting currency to the parent entity reporting currency.  Each Accounting Period gets its own set of Consolidation Rates which represent the end of period rates for the various currency pairs needed in the entity structure at the time of creating rates.

Rate Types

Spot Rate

• Used for Balance Sheet (Asset, Liability, Equity) accounts.
• Defaulted to the exchange rate for the reporting currency for the end of period date.

Weighted Average Rate

• Used for Income Statement (Expense, Revenue) accounts.
• Calculated using journal entries posted from the start of the fiscal year to the end of the specified accounting period.
• Defaults to Spot Rate if there are no journal entries posted in the accounting period.

Historical Rate

• Used for Equity accounts that have been flagged for using the historical rate.
• Similar calculation as the Weighted Average Rate except it only uses Journal Entries posted against Equity accounts.
• Defaults to Spot Rate if there are no journal entries posted in the accounting period.

How these rates are used in calculations

To get consolidated balances at each parent Location level required, the following steps are performed:

• Review the Location structure to understand required currency pairs to translate balances up the structure.
• For each child Location, sum up the balances in the reporting currency of the child Location.
• Convert the balances to the Parent Location's reporting currency using the appropriate Consolidation Rates.
• Sum up the converted balances for all child Locations to get the total consolidated balance at the Parent Location.

Calculation Example

To calculate the Consolidated balances for the example mentioned above, consider the following consolidation rates.

Accounting Period: August 2024

Ledger Account 110000 - Cash is an Asset Ledger Account Type and uses the Spot Rate for Consolidation Rates.

• USD Balance in Global: 1,000 USD
  • No consolidation needed for balances at the reporting entity.
• EUR Balance in Europe: 1,000 EUR
  • Convert to USD using the Spot Rate: 1,000 EUR * 1.10 = 1,100 USD
  • USD Balance: 1,100 USD
• AUD Balance in Australia: 1,000 AUD
  • Convert to USD using the Spot Rate: 1,000 AUD * 0.70 = 700 USD
  • USD Balance: 700 USD

Total Consolidated Balance at Global = 1,000 USD (Global) + 1,100 USD (Europe) + 700 USD (Australia) = 2,800 USD

How to set up Consolidation Rates

Consolidation Rates can be accessed from the Admin > Consolidation section

The Consolidation Rates can only be added/modified/deleted for Accounting Years that are Open. Users can only view Consolidation Rates from closed Accounting Years until reopened.

The Accounting Period dropdown at the top can be used to view the Consolidation Rates for a specific accounting period:

Populating Rates

Upon selecting an Accounting Period, the Add Rates button can be clicked to auto populate the rates for the period.

Consolidation Rates can only be added for prior Accounting Periods. Rates can not be entered for Accounting Periods in the future.

The Add Rates button adds in all the child to parent Location Consolidation Rates for the selected Accounting Period. Each of these rates gets the following default values:

• Spot Rate: Currency exchange rate for the child Location to parent Location for the last day of the Accounting Period.
• Weighted Average Rate: Calculated using the Journal Entries posted in the child Location from the start of the fiscal year to the end of the specified Accounting Period.
• Historical Rate: Similar to weighted average rate except only used for Journal Entries posted against specified Equity Ledger Accounts in the child Location.

Editing Rates

All of the rate values can be edited using the Edit pencil icon against each value. Clicking on the icon opens an inline editor.

Editing allows for the following:

• Manually editing the rate value.
• Resetting the rate value to the default value (set depending on the type of rate).

Click the checkmark icon to confirm the changes, or the X icon to escape without changes.

Resetting Rates

Resetting all three Rates for one or a bunch of currency pairs can be done using the bulk action. Just select the rows and click Reset button and click Confirm:

Each Rate can also be reset at each row from the dropdown menu:

Deleting Rates

Consolidation Rates can be deleted if both of the following conditions are met:

• There are no further child Locations associated with the child Location of this Rate.
• There are no Journal Lines associated with the child Location of this Rate.

Deletion can be done using the bulk action or using the action menu and clicking Confirm:

Populating Rates directly from Consolidated Reports

When viewing Consolidated reports for a period that's missing the Consolidation Rates, a banner at the top of the report area will prompt to populate the rates. Clicking the Populate button will automatically populate the missing rates for the selected period. Clicking the View Consolidation Rates button will open the Consolidation Rates page.