REQUIREMENT:
Can anyone explain why two lines in the same journal for the same FX amount would end up with slightly different USD (base currency) amounts? A single standard journal uses one rate so how can the base amount be different?
ANSWER:
In a standard journal, all foreign currency (FX) lines in the same journal should theoretically use the same exchange rate to convert to the base (USD) currency. So if you have two lines for the same FX amount, the USD amount should be exactly the same.
However, there are a few reasons you might see small differences:
- Rounding Differences:If currency conversion results in a long decimal value, the system may round each line individually according to the currency’s precision rules (e.g., to two decimal places for USD).
- Example: Two lines with the same FX amount could, through separate calculations and roundings, end up with USD values that differ by a penny.
- Line Type or Account-Specific Rules:Some systems allow for different conversion rules for different account types or line types (e.g., taxes, multi-entity setups), which may incidentally use slightly different rates or rounding logic.
- Manual Edits:If journal lines were entered manually and the user overrode the default conversion rate or USD value on one of the lines, this could cause a discrepancy.
- Precision in FX Rate Storage:Sometimes the displayed exchange rate is less precise than the rate actually used in the calculation. For example, the system might multiply by a rate stored to six decimal places, but only show four.
- Currency Conversion Timing:If lines were saved at slightly different times and the FX rate is dynamic (unlikely for a single manual journal, but possible in automated entries), this can result in minimal differences.
Key checks:
- Go to the journal entry and check the base (USD) amount calculation and the FX rate stored for each line.
- Look at the audit trail or review history to see if any manual adjustments were made.
- Check the decimal precision in your ledger’s currency settings.