This topic describes the step to create and pay the first multicurrency accounts payable voucher in Costpoint.
Costpoint recognizes the following three currency types for recording accounts payable transactions:
Functional Currency — Your functional currency was selected when your company originally installed Costpoint. This is the currency used for your company's financial statements. Once the functional currency is selected, you should not change it. (If you are unsure what your functional currency is, display the Configure General Ledger Settings screen.)
Transaction Currency — The transaction currency is the currency that your vendor used on the invoice you received. This currency may or may not be the same as the functional currency or the pay currency. However, the transaction currency and the pay currency are frequently the same.
Pay Currency — The pay currency is the currency in which your vendor is expecting payment. This currency may or may not be the same as the functional currency or the transaction currency. However, the transaction currency and the pay currency are frequently the same.
For more information on using multiple currencies, see Currencies in Costpoint.
Before you start the payment procedure, determine the currency you will use to pay the invoice. For this example, we assume the following:
Your functional currency is United States dollars.
You received an invoice with a transaction and pay currency of Japanese yen.
You have not initialized any portion of Costpoint Multicurrency.
To use a selected pay currency, your company must maintain a bank account held in that currency. For the example that follows, your company has a bank account held in Japanese yen.
Use the Manage Currencies screen to select the currencies that will be used in Costpoint. Costpoint has loaded over 150 currency ISO codes into your system. An ISO code is a three-letter abbreviation selected by the International Standards Organization to identify each currency.
Use Lookup in the Currency ISO Code field to select JPY (Japanese yen). Accept or override the formal and informal names for this currency. In addition, you need to review the four formatting group boxes on this screen to make sure that your transaction currency (Japanese yen) adheres to the formatting standards of that country (Japan). The Decimal Digits field in the Currency group box is the most important. This field determines the rounding that occurs when this currency is displayed or printed in Costpoint. Some currencies with a relatively low value do not show any numbers to the right of the decimal point. You can choose to display two, one, or no digits to the right of the decimal.
Use the Manage Currency Status screen to activate this currency. You do not need to enter an activation or expiration date for this currency in the Currency Status group box. However, if you do enter an activation and expiration date, transactions in that currency are only allowed within that date range. If you enter only an activation date, no transactions in the currency are allowed before the activation date but there is no expiration date. If you enter only an expiration date, transactions in the currency are allowed from the current date until the expiration date.
Use the Manage Exchange Rate Sources screen to specify sources for your exchange rates. You can have any number of sources, but you must designate one as the default source.
While there are dozens of sources for exchange rates, most companies select one source and use it as the exclusive source for their rates.
On the Manage Exchange Rate Groups screen, create a rate group. The rate group links a rate source (already selected in step 3) to one or more currency relationships (from United States dollars to Japanese yen in our example).
For each pay and transaction currency you use, create a relationship (and later enter a rate) between those currencies and your functional currency. All accounts payable transactions are processed through the functional currency, not directly from transaction currency to pay currency.
If this is your first accounts payable transaction, review the settings in the Configure Multicurrency Settings screen. (These settings are usually established when you initialize Costpoint Multicurrency.) Your company's functional currency (in this example, United States dollars) is displayed in the Functional Currency field in the Currency Settings block. The default transaction currency should be the currency that you most frequently use as your transaction currency. Though this invoice will be transacted and paid in Japanese yen, you should not enter JPY in Default Transaction unless most of your foreign currency transactions occur in yen.
In Default Rate Group, select the group you created in step 4, but you should also confirm that the currency relationships you need (for this example, yen to dollars and dollars to yen) exist in that rate group. The settings for overriding rates and computing gains/losses are extremely important. If you select the Allow users to override exchange rates check box, users can override the rates entered on the maintenance and rate entry screens. If allowed, this override can occur in screens such as:
Manage Accounts Payable Vouchers screen (to edit currency of an A/P voucher)
Edit Voucher Payment Status screen (to edit currency to pay an A/P voucher)
Manage Cash Receipts screen (to edit a cash receipt)
Unrealized gains and losses are calculated at each period end but can be posted in one of two ways. The Net Change method posts each period gain or loss at the end of the period. The ITD Balance (Inception to Date Balance) method posts the running total of gains and losses and reverses that posting in the following period.
On the Manage Multicurrency Accounts screen. follow your company's procedures to assign the gain and loss accounts and organizations. If your company uses Ref 1 and Ref 2 as additional data entry fields, you can assign reference numbers to the gain and loss fields in the Reference No block. These settings determine the posting location of gains and losses on currency transactions.
Enter the exchange rates for the currencies of your accounts payable transaction. You can maintain currency on a regular schedule (possibly daily or weekly) or enter currency rates on an as-needed basis. Use either the Manage Period Exchange Rates screen or the Manage Daily Exchange Rates screen. Remember that accounts payable transactions are "translated" from transaction to functional currency, then from functional to pay currency. Therefore, for our example, you need to enter rates from yen to dollars and then dollars to yen.
Your company's policy should determine whether you maintain exchange rates by period or by date. You can keep rates by both date and period, but Costpoint first looks for daily rates and then, if none are available, it uses the period rates. (Costpoint only uses period rates by default in this situation if the Use period rate, if available check box is selected on the Configure Multicurrency Settings screen.) For the most accurate accounting of gains and losses, enter the rates for each business day.
Display either the Manage Exchange Rates by Date screen or Manage Exchange Rates by Period screen, and use Query to search for the rate group you created in step 4. Complete the table with the yen-to-dollar rate.
Enter your voucher as usual in the Manage Accounts Payable Vouchers screen. Use the Exchange Rates subtask to select the transaction and pay currencies (yen for this example). Before posting the voucher, open the Currency Line subtask and review each line of the voucher. That subtask provides an item-by-item comparison of your transaction, pay, and functional amounts.
Run the Update Open Accounts Payable Exchange Rates process. If you do not run this process between the AP voucher posting process and the voucher selection process (in the Edit Voucher Payment Status screen), Costpoint does not record exchange gains or losses.
Pay your voucher as usual, printing the check against your yen bank account.
At the end of the fiscal period, after you run the Update Open Accounts Payable Exchange Rates process, run the Compute/Post Unrealized Gains/Losses process. Since this process includes all multicurrency transactions, run it only after you have completed all accounts payable, purchase order, billing, and accounts receivable transactions for the fiscal period.