Impacts SoftLedger Multi-Entity / Multi-Currency customers, i.e. customers who have more than one location, and at least one location is reporting in a different currency than the others.

What is it?

A cumulative translation adjustment (CTA) summarizes the gains and losses resulting from varying exchange rates over time. It is an entry in the accumulated other comprehensive income section of a translated balance sheet. A CTA entry is required under US GAAP, per Financial Accounting Standards Board (FASB) Statement 52 and under IFRS, per International Accounting Standards (IAS) 21, as a means of helping investors differentiate between actual operating gains and losses and those generated via currency translation.

[ Also read our in-depth article on Cumulative Translation Adjustment (CTA): The Ultimate Guide ]

How-To in SoftLedger

When closing the companies Fiscal Year, the following steps help achieve the booking of the Cumulative Translation Adjustment entry. [e.g. DR: Accumulated Other Comprehensive Income CR: Other Comprehensive Income | debits and credits could be flipped as appropriate]

Create two new ledger accounts and add one to your Chart of Accounts

  1. Accumulated Other Comprehensive Income | TYPE: Equity | Add to Balance Sheet near Retained Earnings
  2. Other Comprehensive Income | TYPE: Equity | Exclude from Balance Sheet Report
NOTE: Customers create a separate report to capture and report on Other Comprehensive Income

System Account Default Settings

Required account settings to set default accounts in SoftLedger

Navigate to Settings > Accounts 

Add New Ledger Accounts created above & Retained Earnings Account

Closing the Year

Navigate to Admin > Acc. Periods & Close out Fiscal Year. This will book the Retained Earnings and CTA entry as of 01/01/YYYY.

Want to see an Example?

See Cumulative Translation Adjustment Example Article