Foreign currencies, exchange rates, currency exchange risks, realised and unrealised gains & losses? Sounds daunting! Don’t worry, Business Central has your business back.
The world is one interconnected global market, buying or selling products and services is no longer limited to the local market.
More and more businesses must operate with foreign currencies and manage the exchange rate risks.
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1οΈβ£ First, define the JPY as a currency and configure the currency exchance service. I used XE Currency Data extension, so all foreign exchange rates are synchronised seamlessly.
2οΈβ£ The business received 3 invoices in JPY from the lawyer in Japan, with the first registered on May, 1st. Each invoice has identical Original Amount (LCY and JPY), Amount (LCY & JPY and Remaining Amount (LCY & JPY).
3οΈβ£ At the end of May, run Adjust Exchange Rates to run the foreign currency revaluation process, so the value in local currency correctly reflects the value in JPY as per May, 31st exchange rate. Accounting is updated automatically at the completion of the Adjust Exchange Rates process.
4οΈβ£ After running Adjust Exchange Rates, the invoice was revaluated. Notice that while Original Amount (JPY) = Amount (JPY), now there is a difference between Original Amount (LCY) and Amount (LCY).
5οΈβ£ Because of a stronger JPY, the business registered an Unrealised Loss at the end of the month. That means, the business will have to pay more local currency (LCY), for the same value in JPY. Unrealised Loss = LCY 117.75
6οΈβ£ The business registers a partial payment on June 30 (JPY 600,000) and, because of the weaker JPY, the business pays only LCY 9,807, while
per the May 31st exchange rate, JPY 600,000 was equivalent to LCY 10,059.60. Hence the business registers a LCY 252.60 Realised Gain.
7οΈβ£ At the same time, the value of the invoice was also adjusted to consider the partial payment and shows a reversal of the initial Unrealised Loss of LCY 94.20.
Note: The invoice is still valued at the exchange rate from May 31st. Run Adjust Exchange Rates again to revaluate it based on the exchange rate from June 30th.
