Calculation of the local cash flow and currency difference

In the Entity Cash Flow Adjustments report, you can verify whether the difference of the cash and cash equivalents in the balance sheet between the current and the previous period is the same as the result of the cash flow. The previous period is usually period 12 from the last year.

Select Cash Flow > Entity Cash Flow > Entity Cash Flow Adjustments.

Defining which financial accounts are used to determine whether the net increase or decrease in cash and cash equivalents (that is, the cash flow statement) is wholly explained by the balance sheet accounts is done through parameterization based on the Cash Account type. Defining such financial accounts is configuration set, version, and period-dependent. This allows a changed financial account structure if more or fewer accounts are considered.

If the cash flow is explained in detail by the comparison of the balance sheet account setting of the previous year to the current year, then the difference in local currency is 0. Only then can the resulting group currency difference be explained by the currency translation.

If the cash flow is not explained in detail by the comparison of the balance sheet account setting of the previous year to the current year, then the difference in local currency is not 0. In this case you must make manual adjustments, especially when some cash flow accounts still have the type Manual.

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This table shows the formula for calculation of the cash flow currency difference in the standard set up for the system account setting Cash Flow Currency Differences:


Formula steps	Process information
1. All cash flow accounts are converted by the assigned rate type (F, A, WA).	Precondition of the process.
2. Reconciliation is a prerequisite for the calculation of the currency difference. The result of this reconciliation must be 0 in the local currency: `[Cash accounts defined from the balance sheet YTD of the current period in the local currency] - [Cash accounts defined from the balance sheet YTD of the previous period (12/year-1) in the local currency] - [Cash flow account system setting] = 0` Cash accounts (cash flow accounts of type Cash Account) are configured through the cash flow parameter, which is configuration set, version, and period-dependent. The cash flow account system setting of Cash Increase/Decrease in Cash and Cash Equivalence is YTD in the local currency. This setting does not depend on the configuration set, version, and period.	Check is part of the process.
3. Calculation of the currency difference. The result of this calculation is the currency difference: `[Cash accounts defined from the balance sheet YTD of the current period in the group currency] - [Cash accounts defined from the balance sheet YTD of the previous period (12/year-1) in the group currency] - [Cash flow account system setting] = Currency difference in the group currency` Cash accounts (cash flow accounts of type Cash Account) are configured through the cash flow parameter, which is configuration set, version, and period-dependent. The cash flow account system setting of Cash Increase/Decrease in Cash and Cash Equivalence is YTD in the group currency. This setting does not depend on the configuration set, version, and period.	Calculation process

After reconciliation of the local cash flow of foreign entities, the currency difference is calculated by the Cash Flow Currency Differences process.

Select Cash Flow > Entity Cash Flow > Entity Cash Flow Process.

If the local cash flow is not yet reconciled, then you will receive an error message similar to this:

The cash flow reconciliation in local currency for entity XXXX has not been done!