Financial closing- conversion variance debtors & creditors

We will start by looking at the debtor/creditor revaluations. These are unrealised gains and losses as the actual exchange difference will be calculated and posted automatically by Sage X3 when the transaction is matched.

The conversion variance posting is to give a provision for the gain or loss at the exchange rate in the current period only. A reversing journal will be created on the first day of the next period to reverse out the posting. This will require the next period to be open in Sage X3.

To understand the postings generated I have entered an invoice for USD 100 using the exchange rate of 0.6667 giving a GBP value of £66.67. The new month end rate is 0.625 giving a month end value of £62.50 and an exchange difference of -£4.17. Which is the £62.50- £66.67 and we should see the currency revaluation generate this posting. 

Generating the Variance

To generate the conversion variance navigate to Financials > Closing Processing >Conversion Variance (CONVECAR).

On versions up to version 9 the first field will be entitled Variance type and the correct type to select for a debtor/creditor valuation is balance sheet. 

As you can see from the above screen shot, on versions 11 and above the field is actually called Assessment method and the correct selection for debtor/creditor conversion variance should be “By Journal entry”, which will allow revaluation at transaction detail level.

• Leave the company and groups blank and in the reference, select the reference you wish to run the revaluation upon. It is important to run the revaluation independently for each ledger, this is because the base currency for each ledger could be different and also because the transactions could have been posted at different rates.
• Select the company and the sites to include and check the “All Collective accounts”.
• In the start date enter the first day of the first fiscal year, this is to allow old transactions that may still be open to be included in the revaluation.
• The end date would normally be the period end date.
• In the BP type select the one you are running this time.
• Select BP range from-to, it doesn’t matter if this includes suppliers and customers it will only select the ones that you have chosen in the BP type box. 
• Then select the rate type and the rate date for what you wish to run the calculation on.
• Under generation we have a couple of options. The first is to just generate a log file, to do this, leave the Generate entries box unticked and tick the Log file box, then click ok. 

• A log file is then produced showing details of the calculation. After checking the calculation you can then re-run the revaluation choosing the generate entries box.

• You can now select “Active” journal or simulated journals, if you would like to review the transaction in the GL accounts first before committing the transactions you should use active simulation. These journals can also be included in a trial balance report.

• Then fill in the Entry type, journal code and journal date, where the journal date is the last day of the period. The reversing date should be a date in the next period, then select ok to generate the entries.
• If you have run Active simulation to generate the journals, to change these into actual journals once they have been checked, simply run the Conversion Variance again selecting the “Actual” journal. This will delete the simulation journals automatically for you and create the actual transactions.
• This time on the log file you will be able to see the Journal numbers. These journals can be viewed in Financials >  Journal Entry.

The first journal number is the journal created to post the exchange difference and the second is the reversal of that journal. 

As you can see from the journal above two lines have been created. The first line against the debtors control account and the second to the exchange difference account.

You will notice in the screen shot that the balance is 0.00 EUR. This is because the journal is created in the same currency as the original transaction and there is no impact on the EUR transaction.

To see the journal in the ledger currency, select currency from the right- hand list and you will then see the journal for 158.69 GBP.

Please note: You must take care when running the Conversion Variance in “Actual” mode as once the journals have been created, they cannot be deleted.

The conversion variance for customers has now been completed and should be repeated now for suppliers and any other ledgers.