Multi-Currency Reconciliation made easier in ARCS

Account Reconciliation Cloud Service (ARCS) is a tool that helps streamline a company's account reconciliation process by enforcing standardization and operational efficiencies through centralized repository of account reconciliations across all the segments and accounts.

ARCS supports both single currency and multi-currency environments. Single Currency setup is common in ARCS and hence, we will talk about Multi-Currency environment setup.

Enabling an environment for multi-currency is done using the currency buckets setup options. Three currency buckets are available: Entered, Functional, and Reporting.

• Entered--Currency in which the transactions have occurred (Posted Currency)

• Functional--Currency in which the company operates.

• Reporting--Currency in which the financial statements are reported

Scenario 1: All three buckets are enabled

Legal Entity is in UK, transaction is happening in Germany and the company's headquarter is in USA. So, the functional currency would be GBP, entered currency would be EURO and the reporting currency would be USD.

Scenario 2: Functional and Reporting Buckets are enabled

NON US legal entity and the company's headquarter is in USA. In this case the functional currency would be the same as local currency and the reporting currency would be USD.

Scenario 3: Functional and Reporting Buckets enabled for one profile and only Reporting bucket enabled for another

One GL Account associated with one US entity and same GL account associated with one NON-US entity (Assuming that the reconciliations are being performed at account-entity combination). In this case GL Account-US Entity will have only reporting bucket enabled and the latter will have both functional and reporting buckets enabled.

A legal entity has to reconcile in reporting currency since the Financial statements are being reported in the this currency, but before that it has to be made sure that the balances are reconciling in the functional currency as well (or both Entered and Functional currency in case both buckets are enabled) as these are being converted to the reporting currency at a later stage for financial reporting. Also, in some cases, reconciling in Functional/Entered currency is required to fulfill the Local Regulations and Statutory requirements.

ARCS allows all 3 buckets to be loaded from GL through data integration. The currency rates are loaded after that. While performing reconciliations, the amounts for transactions for explaining the balance are entered in the lowest enabled currency bucket (currency in which the transaction has actually occurred). The functional and reporting currency balances are then calculated based on the currency rates loaded in the system for that month.

In case of a multicurrency environment, the Balance Summary for a reconciliation looks like below. It can be considered as a multiple representation of the same balance.

Stepwise Process:

1. Enable applicable Currency buckets in ARCS. Tools->System Settings->Currency->Currency Bucket

    

   Enabling multiple Currency buckets in system settings, enables those currencies (Currency Bucket 1 for Entered Currency, Currency Bucket 2 for Functional Currency and Currency Bucket 3 for Reporting Currency) for all profiles by default. If not required to be enabled for all profiles, the setting has to be exclusively dis-abled for each ineligible profile by editing the profiles.

    

2. Setup Data Integration for the Entered Currency Data files

• Add Category Mapping for Entered bucket

• Setup Import Format

• Setup Location

• Create Data Load Rule for Entered Category

   

1. Load data in ARCS.

    

2. Load Currency Rates in ARCS.

    

    

Challenges:

• Check with your source system (EBS, Oracle Fusion, etc) admin if local currency and reporting currency set of books are different. Also, check if there are standard reports available for extracting local currency data files.

• System Restrictions: System does not allow to edit the Reporting Currency field in case of addition of an Amortizing/Accreting transaction.

Tips:

• If there is a plan of updating an existing single currency ARCS environment to multi-currency at a later stage, make sure your data files for existing currency have the currency column. This will avoid extra effort on setting up data integration again for multi-currency data files

• While adding mapping details under import format for data file, add 'currency row' instead of currency dimension.