Financial closing - conversion variance bank

Another area to consider for conversion variance is the bank account. These are realised gains and losses and as the revaluation is final it doesn’t need to be reversed in the next period.

The process is very similar to that of debtor and creditor revaluation, but here the calculation is at account balance level rather than transaction detail level.

The sheet above shows how the calculation is made, you can see two transactions into the EUR account for 1100.00 EUR. The amount in GBP at the time the transactions took place was GBP 975.10 but we can see that both transactions took place at different exchange rates.

When the conversion variance function is run the total balance in EUR 1100.00 is multiplied by the new month end rate of 0.8000 to give a new month end balance in GBP of 880.00. The amount already posted to the ledger of £975.10 is subtracted from the new month end value of £880.00 thus giving a £95.10 Loss.

• To run the revaluation, navigate to Financials > Closing Processes > Conversion Variance.
• On version 9 and below the Variance type should be “Profit and Loss”, on V11 and above the Assessment method should be “By account Balance” as shown below.

• Leave the company groups blank and select the ledger you wish to run the revaluation for. Remember you will need to run it once for each ledger.
• Enter the company and site, but this time leave the all collective box unchecked.
• In the ‘Start date’ enter the first day of the current financial year and in the ‘End date’ enter the period end date.
• Using the ‘Account from’ and ‘Account to’ fields select the range of bank accounts you would like to revalue.
• Use the ‘Rate type’ and the ‘Rate date’ to determine the exchange rate that will be used in the calculation.
• The generation of the log file and also the simulation and actual journal generation is the same as that for the Debtor/Creditor revaluation. The only difference is that as this is for a bank account the reversal date is not required and must be blanked out.

Once all the selections have been checked click ok. The log file produced will show you the details of the calculation.

Here you can see the original USD amount with the original GBP value, the new rate and value in GBP and the variance. The journal number is also provided and can be viewed in Financials>Journal entry.

Please note: there is no reversing entry

The journal shows nothing for the GBP value as shown below.

But when selecting the currency button from the righthand side it will show you the revaluation of the USD amount.

Once the conversion variance has been run for all the ledgers and all of the bank accounts, the revaluation is now finished.