During a review of the bank register following the migration of opening balances to NetSuite, discrepancies were discovered between the foreign currency amounts recorded in NetSuite and those in the client’s legacy system. Although reports in the subsidiary’s base currency accurately reflected the correct amount, there were notable differences in the foreign currency balances.
The discrepancy arose because only two transactions were created in NetSuite as part of the opening balance migration: a payment for a partially paid invoice and an opening journal entry. The customer payment matched the amount in the legacy system, but additional transactions recorded in the legacy system were not included in NetSuite. This omission led to differences in the foreign currency balances.
For example, a payment of 2000 GBP was migrated, which should convert to approximately 14,000 AED based on the exchange rate. However, the balance in the bank account for the same period showed 3000 GBP with 13,000 AED. To align the balances, an adjustment was needed: the opening balance journal required debiting the transaction amount, but the base currency would only be accurate if credited appropriately.
The issue was complicated by numerous transactions in the legacy system with varying exchange rates, and there was also a possibility of errors in the client’s exchange rate entries.
To resolve the discrepancy, two opening journals were created instead of one. The first journal credited the bank account with an amount at a higher exchange rate to address the difference. The second journal debited the base currency balance using a lower exchange rate, effectively correcting the base amount.
Although the exchange rates used in the adjustments were significantly different from the real values, this approach was permissible because the accounting period had already closed and these adjustments were only for the opening balance. As such, the variation in exchange rates did not impact the financial statements for the period.
This solution effectively reconciled the foreign currency and base currency balances between NetSuite and the legacy system, ensuring accurate financial reporting and resolution of the discrepancies.