Currency translation adjustment (CTA)

During currency conversion, lines that are balanced in a unit's local currency become unbalanced after translation because different schedule lines are not translated using the same rate (each schedule line is assigned a rate type, and each rate type has its own exchange rate).

To illustrate the problem that results when currency translation involves different exchange rates for different lines, suppose the beginning balance line is translated at the historical rate (.5), the ending balance is translated at the current period balance sheet rate (.6), and the remaining lines are translated at the current activity rate (.4). In the example below, note that the ending balance translated result (39) does not equal the downfoot value (36).

Schedule Line	Local	Rate	Translated
Beginning Balance Raw Material	100	.5	50
Inventory Receipts	20	.4	8
Issues to WIP	55	.4	22
Ending Balance (downfoot)	65	.6	65 * .6 = 39 <> 36

To ensure that the value for the downfoot equals the translated value, the difference should be included as a detail line to the downfoot. For example, the Gain/Loss (CTA) line in this table

Schedule Line	Local	Rate	Translated
Beginning Balance Raw Material	100	.5	50
Inventory Receipts	20	.4	8
Issues to WIP	55	.4	22
Gain/Loss (CTA)			3
Ending Balance (downfoot)	65	.6	39

The difference is computed to a line called Cumulative Translation Gain/(Loss) in the sample database. This line is included in the formula for Total Stockholder's Equity. The value for this CTA lets translated results balance.