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Currency Conversions

Leveraging Oracle's Currency Conversion Can Simplify Your Financial Models

  • Giles

Currency conversion in financial statements is a very important function for any company with a branch or operation in a foreign country. Accounting standards require that companies which operate abroad translate their operational results into a single functional currency for reporting purposes. Consequently, these companies are searching for options which will simply and accurately produce translation results.

Enter Oracle's suite of on-premise and cloud based EPM products . These products offer both built-in and custom functionality to calculate and produce results in a very efficient manner. While the built-in functionality does work, it sometimes limits the flexibility that companies and developers prefer. For instance, being that the code is pre-built, it will calculate for all years in which exchange rates are stored. However, in most cases, we generally only want the translation to occur for the current year data and not all of history.

As a result of the limitations, a custom based solution is the most commonly used form of currency conversion. A properly designed application will provide consistent results and can be configured to dynamically produce those results all while significantly reducing (and possibly eliminating) maintenance by system administrators. The primary requirement is the loading of new rates on a periodic (usually monthly) basis. Companies typically have this data and a process can be implemented to automatically load those rates into our EPM application. Upon completion of the load, a calculation can be launched that will take those rates and convert all local currencies into a standard reporting currency across the entire organizational structure. If a new entity must be added to the structure, it is as simple as tagging it with the appropriate currency code and it will automatically be translated during the next run of the process.

All of this translates to a dynamic design that will grow with your business and meet all of your GAAP guidelines for reporting. In addition, by going a step further and incorporating constant currency analysis into your model, you can easily evaluate trends in earnings, for instance, by removing the volatility of exchange rate swings. Effective management means being able to see issues before they become problems and Oracle's currency conversion functionality can help clarify those issues.

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