To learn how to manage exchange rates at the firm level, see the Manage Exchange Rates page.
To learn which exchange rates are supported, see the What currencies does Lucernex support? question on the Frequently Asked Questions page.
The guidance is as follows:
-
The asset’s value is to be converted from source to target currency at a conversion rate that was applicable at the time of lease commencement. Further, this conversion rate should not change over the life of the lease. This is because the right-of-use asset is a non-monetary asset.
-
The liability, however, is to be converted at the “current time” of reporting, and so the currency conversion for liability expenses will walk with time as the liability is amortized. This is because the liability is a monetary liability.
-
See ASC 842-20-55-10 for more information.
The rules below apply to accounting schedule conversions in reporting and on the page when the Calculate FX Impact check box is selected. In all other areas in the system where currency values may be converted—such as the Expense Forecast page—the system will use the most recent exchange rate that has a type of Cash. If there is no exchange rate with a type of Cash, the system will pull the current rate from a web service (fixer.io).
Notes Regarding This Feature
-
You have discretion to populate the exchange rate table as meets your needs.
For example, if you want to choose a particular day’s exchange rate—say, the 30th or the 15th—in a fiscal period to represent that period, you are free to load only that day for each period.
-
If you want to convert all liabilities for a given fiscal quarter with a common average rate, then you need only load one value per quarter, corresponding to a date in the first fiscal period of that quarter, and the other fiscal periods in the quarter will find and use that same rate.
-
You can project the impact of exchange rates into the future by loading fictional exchange rates in the firm-wide exchange rate and reporting on the liability foreign exchange impact values.
Important!If you choose this method, be sure that you remove those records after the modeling exercise.
What are Foreign Currency Conversion Types?
You can select a Type when creating or editing a foreign exchange rate. This functionality allows you to enter multiple exchange rates for the same fiscal period, giving you greater flexibility in reporting. There are two default exchange rate types: Period Average, and Cash. You can also create new types to suit your business needs.
Any existing foreign exchange rates that were entered in Lucernex prior to the 19.04 release will be automatically assigned the Balance type.
As of the 19.08 release, the Balance exchange rate is no longer going to be used as a default exchange rate type. Going forward, please use the Cash rate.
Example use cases of the default exchange rate types are as follows:
-
The Period Average rate typically includes up and down fluctuations over the fiscal period. This rate is used to convert period expenses like the single-lease expense, liability amortization expense, and interest expense.
-
The Cash rate, also known as the payment day spot rate, is typically used to convert the Cash Expense column in the schedule.
The use of these rates varies—and the number of exchange rate types may vary—but this field allows you the flexibility to use exchange rates as needed.
Manage Foreign Exchange Rates at the Firm-Level
The following expanding sections teach you how to manage your foreign exchange rates at the firm-level.
Set Default Foreign Currency Conversion Types for Reports
You can select the default foreign currency conversion type used in reports.
To configure the default foreign currency conversion type used in reports:
-
Click Admin in the toolbar in the upper-right corner of the window.
The System Administrator Dashboard page opens.
-
Click Manage Company link in the Company Administration column.
The Manage Company page opens.
-
Select the Financial Settings tab.
The Financial Settings page opens.
-
Scroll down to the bottom of the page.
-
Select the default currency for your firm from the Home Currency field.
-
For the New Rate at / on setting, choose between two options:
-
Commencement: The rate equals the Cash (Spot) rate that is closest to but not before lease commencement.
-
Schedule Begin - The rate equals the Cash (Spot) rate that is closest to but not before the Schedule Begin Date.
-
-
Select the appropriate values from the following fields in the Revaluation section:
These are the currency conversion types used for contracts in need of revaluation.
Setting
Definition Default Type
Affected Fields
Liability Balance
the foreign exchange rate type you want to use for your liability balance conversions Cash
(rate at end of the month used)
-
SLPeriod.LiabilityAmount
-
SLSummary.CurrentLiabilityBalance
-
SLSummary.Forward12MonthLiabilityChange
Cash Expenses
the foreign exchange rate type you want to use for your cash expense conversions Period Average -
SLPeriod.PeriodCashAmount
Asset Amortization
the foreign exchange rate type you want to use for your asset amortization conversions Cash
(rate at begin of the month used. This value is fixed—it does not change over the life of the lease unless the schedule is remeasured.)
-
SLPeriod.PeriodAssetAmortizationExpense
Asset Balance the foreign exchange rate type you want to use for your asset balance conversions Cash
(rate at begin of the month used. This value is fixed—it does not change over the life of the lease unless the schedule is remeasured.)
-
SLPeriod.AssetAmount
Interest the foreign exchange rate type you want to use for your interest conversions Period-Average -
SLPeriod.PeriodInterestAmount
Single Lease the foreign exchange rate type you want to use for your single lease expense conversions Period-Average -
SLPeriod.PeriodExpenseAmount
Liability Amortization the foreign exchange rate type you want to use for your liability amortization expense conversions Period-Average -
SLPeriod.PeriodLiabilityAmortizationExpense
-
-
Select the appropriate values from the following fields in the Translation section:
These are the currency conversion types used for contracts in need of translation.
Setting
Definition Default Type
Affected Fields
Liability Balance
the foreign exchange rate type you want to use for your liability balance conversions Cash
(rate at end of the month used. This value can vary by period.)
-
SLPeriod.LiabilityAmount
-
SLSummary.CurrentLiabilityBalance
-
SLSummary.Forward12MonthLiabilityChange
Cash Expenses
the foreign exchange rate type you want to use for your cash expense conversions Period-Average
-
SLPeriod.PeriodCashAmount
Asset Amortization
the foreign exchange rate type you want to use for your asset amortization conversions Period-Average
-
SLPeriod.PeriodAssetAmortizationExpense
Asset Balance the foreign exchange rate type you want to use for your asset balance conversions Cash
(rate at end of the month used. This value can vary by period.)
-
SLPeriod.AssetAmount
Interest the foreign exchange rate type you want to use for your interest conversions Period-Average -
SLPeriod.PeriodInterestAmount
Single Lease the foreign exchange rate type you want to use for your single lease expense conversions Period-Average -
SLPeriod.PeriodExpenseAmount
Liability Amortization the foreign exchange rate type you want to use for your liability amortization expense conversions Period-Average -
SLPeriod.PeriodLiabilityAmortizationExpense
-
-
Click Update.
The page refreshes. Your changes are saved.
Enter Firm-Level Exchange Rates
At the firm-level you can enter and update a table of dated exchange rates on the Manage Exchange Rates page. The values entered there are Effective Date, From Currency, To Currency, Exchange Rate, and Type. The date of the exchange rate record will be important in the subsequent discussion. You can enter exchange rates with whatever frequency you like.
Lucernex is capable of inverting any exchange rate from To Currency to From Currency as well. These can be edited in the UI or uploaded via spreadsheet.
Accounting Value Conversions at the Time of Reporting
The Report Builder allows you to create reports that you can run on demand. In Step 7 of the Report Builder, you can specify the desired target currency for the report. This setting will use one of two exchange rates:
-
the exchange rate provided for the relevant source and target currencies in the firm Exchange Rate table, OR
-
if there is no entry for the currency pair in the Exchange Rate table, the system will return a null value.
For this discussion, the relevant quantities that are being treated are in the Contract SLPeriod and SLSummary database tables.
The Asset values will be converted at a rate that is relevant to the date at the onset of the lease, and this exchange rate will not change with the fiscal period of the schedule. This means that the system will look for an exchange rate record with a date that is close to the start date of the schedule, and convert all asset balances for all periods at that rate.
The Liability values will be converted at a rate that is relevant to each fiscal period of the schedule. This means that the system will look for an exchange rate record with a date that belongs to the date range of that fiscal period, and convert the liability balances for that period at that rate.
Field-Level Conversions
In Report Builder currency conversions, these fields will be converted according to the foreign exchange rate record appropriate for the Contract Possession Date.
-
SLPeriod.LiabilityAmount
-
SLPeriod.PeriodLiabilityAmortizationExpense
-
SLPeriod.AssetAmount
-
SLPeriod.PeriodAssetAmortizationExpense
-
SLSummary.CurrentAssetBalance
-
SLSummary.Forward12MonthAssetChange
-
SLSummary.InitialAssetBalance
-
SLSummary.InitialAssetBalanceAdjust
-
SLSummary.CurrentLiabilityBalance
-
SLSummary.Forward12MonthLiabilityChange
-
SLSummary.InitialLiabilityBalance
-
SLSummary.InitialLiabilityBalanceAdjust
View Rent Schedule Values in a Different Currency
If your contract or equipment contract is marked as In Translation, three additional columns appear in the Fiscal Details view.
-
Asset Translation Adjustment: The value of this field equals the current month's asset balance plus the current month's asset amortization expense minus the prior month's asset balance.
Asset Translation Adjustment = Current Asset Balance + Current Asset Amortization Expense - Prior Month's Asset Balance
-
Liability Translation Adjustment: The value of this field equals the current month's asset balance plus the difference between the current month's payment and interest, minus the prior month's asset balance.
Liability Translation Adjustment = Current Asset Balance + (Current Month's Payment - Current Month's Interest) - Prior Month's Asset Balance
-
Cumulative Translation Adjustment: The value of this field is the current month's liability translation adjustment minus the current month's asset translation adjustment.
Cumulative Translation Adjustment = Current Month's Asset Translation Adjustment - Liability Translation Adjustment
If you perform these procedures prior to following the Export a Lease Accounting Schedule into Excel procedures, the translated values will appear in your exported spreadsheet.
To view converted currency values on a Rent Schedule page:
-
Navigate to one of the following nine pages.
Use the links in the Navigation Pane on the leftmost side of the page.
-
Contract > Accounting Info > ASC 842 Rent Schedule
-
Contract > Accounting Info > IFRS 16 Rent Schedule
-
Contract > Accounting Info > GASB 87 Rent Schedule
-
Equipment Contract > Accounting Info > ASC 842 Rent Schedule
-
Equipment Contract > Accounting Info > ASC 842 Rent Schedule >ASC 842 Equipment Schedules Page
-
Equipment Contract > Accounting Info > GASB 87 Rent Schedule
-
Equipment Contract > Accounting Info > GASB 87 Rent Schedule >GASB 87 Equipment Schedules Page
-
Equipment Contract > Accounting Info > IFRS 16 Rent Schedule
-
Equipment Contract > Accounting Info > IFRS 16 Rent Schedule >IFRS 16 Equipment Schedules Page
-
-
Select the schedule whose converted values you want to view from the Rent Schedule List.
The schedule data appears on the page.
-
Select the Fiscal Details option above the lease accounting schedule table.
-
The Fiscal Details view of your lease accounting schedule appears.
-
Select the Calculate FX Impact check box.
Several columns are added to the right side of the lease accounting schedule table. These columns contain the converted values of your lease accounting schedule.
Additionally, the Translated Initial Balance and Translated Initial Liability Balance appear to the right of the Target Currency field. These fields display the converted values of your Translated Initial Balance and Translated Initial Liability Balance.
-
Select the currency whose conversion you want to view from the Target Currency field.
The translation columns in the lease accounting schedule table update to show currency values in your target currency.
-
Scroll the page to the right to see the currency conversion columns.
The conversion rates used appear in the Period Average Rate and Cash Rate columns.
How Lucernex Chooses the Appropriate Exchange Rate
The rules below apply to accounting schedule conversions in reporting and on the page when the Calculate FX Impact check box is selected. In all other areas in the system where currency values may be converted—such as the Expense Forecast page—the system will use the most recent exchange rate that has a type of Cash. If there is no exchange rate with a type of Cash, the system will pull the current rate from a web service (fixer.io).
The rules the system uses to select the appropriate exchange rate record for an accounting schedule are as follows:
-
The system will search for an exchange rate record that has a date that is between the target period begin and end dates.
Within this context, a target period can be any of the following: a single accounting schedule period, a quarter, a year, or several years.
-
If the system finds any client-defined exchange rate records of the applicable rate type, it will select the appropriate record as follows:
-
If multiple exchange rate records have an Effective Date in the target period, then the system will choose the closest one to either the begin or end date of the period.
In this example, imagine your fiscal period begins on the 1st of the month and ends on the 31st. If you are looking for an exchange rate for the end of the period and there are two rates loaded for the 20th and the 28th, the system will select the rate for the 28th because it is the closest to the end of period. If you are looking for an exchange rate for the beginning of the period and you have rates for the 3rd and the 5th of the month, the system will select the 3rd.
-
If only one has an Effective Date in the target period, then the system will choose that record.
-
If none have an Effective Date in the target period, then the system will check for records with effective dates prior to the target period. If any are found, it will choose the one whose Effective Date is closest to the period’s begin date.
-
If none have an Effective Date in or prior to the target period, then the system will check for records with effective dates after the target period. If any are found, it will choose the one whose Effective Date is closest to the period’s end date.
-
-
If the system does not find any client-defined exchange rate records of the applicable rate type, it will use the current rate from a web service (fixer.io).
Note:Only the needed currency pair is required. For example, the system can invert a stored exchange rate USD > EUR to the correct value for EUR > USD.
Foreign currency impact
The system has a reportable field in the SLPeriod table— the Period Liability FX Impact field. This field contains the value, in the target currency, of the difference between the period’s liability converted at the prevailing rate and the liability converted at the same initial rate that is applied to the asset. This allows clients to assess the impact of currency conversion fluctuations on a period-by-period basis. This impact can be summed or otherwise fed into summative calculations in customized reports, for example to report on P&L impact over a quarter or a year.
The formula used to calculate value of the Period Liability FX Impact is:
Period Liability FX Impact = (FX rate for this period - initial FX rate) * Period Liability Balance
