Accounting question - we have a request from our auditors to prove how currency gain/loss was calculated when cash receipts were posted.
Background: Customer is setup with billing currency of Australian dollar (AUD), everything else we do is in USD.
Invoice is created in AUD and posted. At the time of cash receipt we most likely have a different currency exchange rate (we update them monthly).
My assumption (may not be correct) would be that the gain/loss calculation during cash receipt posting would be to look at the original invoice amount (converted to USD) and the amount paid on the invoice is posted in AUD (converted to USD) and the difference would be gain/loss.
When we attempt the calculation by hand we are not getting the same gain/loss value as what Epicor posted. We use standard posting rules.
While I try to dig into the posting rules, does anyone already know how Epicor calculates currency gain/loss and would help share some light on this?
With the help of another user from the Epicor Users Group here are the solution with additional comments in case anyone else runs into this issue in the future:
Doc Amount x Currency rate on Invoice date = Base Currency Amount – (A)
Doc Amount x Currency rate on payment date = Base Currency Amount – (B)
Gain(Loss) = B – A
In addition to this calculation I discovered we couldn’t tie our numbers based on how the cash receipt transaction were entered. So for anyone that might need this info in the future.
At cash receipt entry- A/R Receipt screen if you enter the amount received in USD and update the receipt currency to in our case AUD the Bank Amount field is automatically calculated by looking at last entered effective currency exchange rate. In our case we update exchange rates monthly. (seen on Header Currency tab)
Accounting actually updates the Bank Amount field with the actual received USD cash amount and when doing so the the AUD-> USD exchange rate gets updated to match the cash receipt entry.
If cash receipt entry exchange rate is different than entered rate in currency exchange entry, the gain/loss calculation will always look at the rate in cash receipt entry. Once we manually did the calculations using this exchange rate we tied out just fine.