NetClose - Reconciliation Exchange Rate Handling
Summary
NetClose Reconciliations will show the total GL activity as the sum of all transactions converted to the functional currency of the subsidiary. If you have subsidiaries with different currencies and are not segregating your reconciliations by subsidiary, NetClose will not consolidate into a single currency. For this reason, if you have subsidiaries with different currencies, it is best to segregate your reconciliations by subsidiary and reconcile on a subsidiary-by-subsidiary basis. For more information on the segregation setting you can read out Account Grouping Basic Configuration article.
How NetSuite Handles Currency Exchange
Before we get into how NetClose Reconciliations deal with currency exchange rates, it's important to have a basic understanding of how NetSuite deals with currency exchange. There are two different currency exchange rate tables we'll talk about here--the "Currency Exchange Rates" table, and the "Consolidated Exchange Rates" table. Each are used in different places and scenarios in NetSuite, and they don't necessarily need to match up at any given period. We'll go over each of them.
If you're comfortable with this, just use the table of contents to skip to a relevant section.
Currency Exchange Rates (Transactions)
The Currency Exchange Rates table is found at Lists > Accounting > Currency Exchange Rates. This is the table used when NetSuite decides what the GL impact of a transaction will be.
There's a base currency, a source currency, the rate, and the effective date. The source currency is the currency the transaction is in, the base currency is the currency of the subsidiary the transaction is recorded in, and the exchange rate is what is applied to the source currency to get to the base currency amount. The effective date is the date from which that exchange rate will be applied; it gets updated whenever a new exchange rate is added to the system (your system can get these added automatically, or they can be manually added; how your exchange rates get into your system is beyond the scope of this article), but the historical rates are still maintained in NetSuite in case you have a transaction dated earlier than today's date.
Whenever a transaction is booked in a currency different from the subsidiary the transaction is booked in, NetSuite automatically applies the applicable exchange rate to the transaction. This is what hits your general ledger for this subsidiary. You can always see the GL impact of a transaction and the rate applied on any transaction once posted. The exchange rate should be in the main body of the transaction, and the translated GL impact will be in the GL impact page found under the "Actions" tab on the transaction.
This "GL Impact" amount is what will be pulled into the reconciliation record for NetClose, NOT the underlying currency original amount. In this example, a reconciliation for this account, if generated for the United States - East subsidiary would pull in the $11,234 USD balance, not the $10,000 Euro balance.
For more information, take a look at NetSuite's documentation on currency exchange rates: https://docs.oracle.com/en/cloud/saas/netsuite/ns-online-help/section_N1401566.html#Currency-Exchange-Rates
Consolidated Exchange Rates (Reports)
The Consolidated Exchange Rates table is found at Lists > Accounting > Consolidated Exchange Rates. This is the table used to convert transaction values when accessing consolidated financial reports within NetSuite.
In contrast to the currency exchange rates table, these rates apply to an accounting book, a subsidiary pair, and a period rather than to a transaction date or range of dates. That's because rather than applying to individual transactions, the consolidated exchange rate will be applied to an account based on the "General Rate Type" on the account record. You can see above that there are individual columns for historical, current, and average consolidated rates, which will be applied accordingly to each account when a consolidated financial report is run.
This consolidated rate will now be used when you run any report (such as the general ledger, pictured below) that has a "Subsidiary Context" selector that allows you to choose a consolidated account. Transaction values from periods that are not in the consolidated parent's currency will be translated to that currency according to the rates in the consolidated exchange rates table according to the account's general rate type.
That's the extent that we'll cover these two exchange rate types in this article. For more information on consolidated exchange rates, you can reference NetSuite's documentation here: https://docs.oracle.com/en/cloud/saas/netsuite/ns-online-help/section_N1404834.html#Consolidated-Exchange-Rates
How NetClose Reconciliations Works with Exchange Rates
There are two contexts in which we will deal with exchange rates in reconciliations. The first is when you are segregating your reconciliations by subsidiary--you'll have individual reconciliations for each subsidiary available to the accounts in your reconciliation. The second is when you're not segregating by subsidiary, meaning that you are essentially doing a consolidated reconciliation.
Individual Subsidiary Reconciliations
In reconciliations created where the account grouping has the "Segregate by Subsidiary" box checked (see the Account Grouping Basic Configuration article for more information) the amount pulled into the GL balance of the reconciliation will be the same amount shown in your financial reports when run for that subsidiary. This means that reconciliations are pulling in the GL impact of transactions, the amount of a transaction after being translated by the currency exchange rates table.
As an example, if my subsidiary has a Euro currency configured on it and I have an entry booked for $500 USD with a currency exchange rate for the date of the transaction of 0.8, I would expect a GL impact to hit my subsidiary's books of €400. This €400 value is what will be pulled into your reconciliation. If you segregate by subsidiary, you can expect that the subsidiary-specific reconciliation you are performing is going to be expressed in that subsidiary's currency with the values converted by the daily exchange rate applied to that transaction from the currency exchange rates table.
Grouped Subsidiary Reconciliations
Currently, NetClose Reconciliations doesn't support the application of exchange rates from the consolidated exchange rates table to your grouped reconciliations. This means that any reconciliation that is not segregated by subsidiary will be showing the subsidiary currency-specific values as a combined number in your reconciliation record.
As an example, suppose you have two subsidiaries, one using USD as their currency and the other using JPY. If the JPY subsidiary has an entry booked in it in USD for $100 at a 140 USD to JPY currency exchange rate in NetSuite, the GL impact in our JPY subsidiary will be JP¥14,000. If a reconciliation is generated for the account that entry hits in, and that reconciliation is NOT segregated by subsidiary, that entry will pull into the grouped reconciliation as 14,000 instead of 100, even if the consolidated currency is USD.
With this behavior, instead of using foreign currency amounts in reconciliation saved searches, it's advantageous to just use the "Amount" value from journal entries, since this will pull in the subsidiary-specific amount from the transaction instead of the booked currency.