Transaction currency
The currency the invoice or bill was actually issued in, held on the document rather than converted on entry and lost.
Platform · financial core
The most common source of restatement we find in multi-currency groups is treating transaction, functional, and reporting currency as two things rather than three. It works for a while, produces an FX line nobody can explain, and eventually produces a prior-period adjustment.
184 consecutive days tied · variance $0.00
What it does
The currency the invoice or bill was actually issued in, held on the document rather than converted on entry and lost.
The currency the entity operates and keeps its books in. Transactions convert to it at the transaction date rate, and that conversion is what the entity’s statements are built from.
The group presentation currency, produced by translating each entity’s functional-currency statements — a different operation from transaction conversion and frequently conflated with it.
Realised on settlement and unrealised on revaluation, posted to separate accounts rather than netted into one line that nobody can decompose.
Translation difference posting to equity where it belongs rather than being absorbed into an income account, which is the error that produces restatements.
Daily, month-end average, and closing rates from a source you configure, with the rate used recorded on the transaction so a figure can be reproduced.
A company invoices a customer in euros. The entity keeps its books in pounds. The group reports in dollars. Those are three distinct currencies and each conversion between them is a different accounting operation with a different rate convention.
Systems that model only two — transaction and reporting — have to collapse one of those operations, and the collapse usually happens at translation. The symptom is an FX line that grows and cannot be decomposed into realised gains, unrealised revaluation, and translation difference, because those three were never recorded separately.
Cumulative translation adjustment arises from translating an entity’s statements into a different presentation currency, and it belongs in equity. It is not income and it should never touch the income statement.
The error we most commonly find is CTA absorbed into an FX gain or loss account in the income statement, which overstates or understates earnings and is exactly the kind of thing a first audit surfaces. Correcting it retrospectively is a prior-period adjustment, which is why it is worth getting right before scrutiny arrives rather than after.
A converted figure that cannot be reproduced is a figure somebody has to trust. Every conversion records the rate used and its source, so a balance from eighteen months ago can be re-derived rather than accepted.
That is also what makes the audit conversation short. The question is always which rate was applied and why, and having it on the transaction answers it without an investigation.
Limits
Forward contracts, hedge designation, and effectiveness testing under ASC 815 are a specialist area. We record the instruments; the designation and testing is work for your advisors.
Multi-currency structure is handled. Filing statutory accounts in multiple jurisdictions under local GAAP is two decades of accumulated work we have not done.
Where CTA was previously posted to income, correcting it is a prior-period adjustment your CPA decides on. We will identify it and quantify it rather than silently reclassifying.
Questions
Tell us the entities and currencies and we will tell you where the treatment most often goes wrong.