Cumulative Translation Adjustments - overview of set up requirements.

Typically, if a business has operations in different countries, it will use the currencies of the respective countries where they are located. Companies with such an international presence have to translate the value of their transactions and business activities from home currencies into the parent's company functional currency for consolidation and group reporting purposes.

Mondial CRx includes comprehensive Cumulative Translation Adjustment (CTA) functionality. It is calculated and processed through the Accounting Adjustment option within the accounting hub (Management, Revaluation, and Translation Adjustments). 

Setting up CTA

To establish the foundations of CTA, there are 4 steps to complete. Step 1 is a 'group-wide' setting to establish the common corporate currency for the consolidation. Steps 2-4 only need to be completed for those companies whose functional currency is different from the group target currency (i.e. for those companies where a translation calculation is required.) 

1. Setting up the parent company

This step is key to the process because it determines the target functional currency for the CTA process. Companies with multi-national businesses operate using different functional currencies but need to deploy a single common currency for their final reports. The currency that the parent company uses will become the functional currency for the group and the CTA process would be applied to translate all local functional currencies into this target currency.

This article provides a guide to the process of setting up a company as the corporate parent. 

2. Setting up the CTA account

In this step, you will associate a single, preferred CTA account to which all adjustments from cumulative adjustments are gathered and posted. This account needs to exist  in the local chart of accounts for each company

To get more guidance on this step, follow this link. 

3. Set up Ledgers

The process of creating a ledger in Mondial CRx has been outlined here. Typically. a specific ledger will be created (perhaps called "Consolidation") to identify and store the results of the CTA process. This Ledger can then be called upon during reporting to display the results of each company, and the total, in common, translated currency.

4. Assign FX types to accounts using the revaluation section of COA

In order to assign an appropriate translation method to each account within an individual company's chart of accounts, users must associate an FX Type to each account in the local chart. This is achieved using revaluation accounts under the chart of accounts. FX types can be associated with accounts on a Ledger by Ledger basis. Read more on FX types assignment here.

Processing CTA via Translation Adjustments

Once all the setup steps have been finalized, the translation adjustment feature within the Accounting Adjustments menu allows the user to process CTA by ledger, accounting period, and company 

The process of setting and running management adjustment has been described here.