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 .
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.
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:
| Process information | Formula steps |
|---|---|
| 1. Precondition of the process. | Configuration and parametrization of cash flow accounts is a
prerequisite for the calculation of the currency difference. All cash
flow accounts are converted by the assigned rate type (F, A, WA).
These configurations must be done:
|
| 2. Checksum calculation on the Entity Cash Flow Adjustments report. | The checksum calculation is a report calculation in the local
currency. The calculation indicates whether the Net increase/decrease in
Cash and Cash Equivalents setting in the cash flow statement is
explained in total through the balance sheet accounts. The balance sheet
accounts are defined to present the cash in local currencies. This formula shows how the checksum calculation works: [Cash from the balance sheet YTD of the current
period in the local currency] - [Cash from the balance sheet YTD of
the last period of the previous year in the local currency] - [Net
increase/decrease in Cash and Cash Equivalents]If the checksum results in 0, then the cash flow statement is explained in total. If the checksum result is different than 0, then the cash flow is not explained through the balance sheet group accounts. The checksum result is displayed only if you select the local currency in the context. |
| 3. Calculation of the currency difference | Note: Currency differences can only occur in a
group currency.
After reconciliation of the local cash flow of
foreign entities, the currency difference is calculated by the Cash Flow
Currency Differences process. Select .If the local cash flow is not yet reconciled, then an error message is displayed. The calculation of the currency difference is the same as the checksum calculation but it uses the group currency instead of the local currency. The calculated currency differences are displayed only if you select the group currency in the report context. |