A Worday Minute: Foreign Currency 101 in Workday

For a global company preparing financial statements in USD, there are a lot of complex rules regarding foreign currency. ASC 830, Foreign Currency Matters, provides guidance for companies with foreign transactions that require a single set of financials in one reporting currency.

In accounting speak, there are two processes to follow:

  • Foreign Currency Measurement – If a company transacts in a foreign currency (e.g. GBP), it must remeasure these transactions in its functional currency (e.g. EUR). Changes in functional currency amounts are typically recognized as “realized gains/ losses” and booked to net income.

Remeasurement = Transactional à Functional Currency

  • Foreign Currency Translation – To produce a set of USD financial statements, a company must translate from its functional currency (e.g. EUR) into its reporting currency (e.g. USD). Changes in reporting currency amounts are called “translation adjustments” and included in the Cumulative Translation Adjustment (CTA) account as part of Other Comprehensive Income (OCI).

Translation = Functional à Reporting Currency


But how does this translate into Workday speak?

Revaluation in Workday

Workday remeasures foreign transactions into a company’s functional currency through a process called “Revaluation”. This is driven by the “Revaluation Rules” configured in Workday.

Options to consider when creating a Revaluation Rule in Workday:

  • Which ledger accounts you wish to revalue (e.g. cash accounts, net receivables, AP)
  • Revaluation currency rate type (e.g. current rate)
  • Worktags to retain on target and offset (e.g. bank accounts if you are revaluing cash accounts)
  • Offset account posting rules (e.g. realized gain/loss, unrealized gain/loss, transaction gain/ loss)

A company can select to run revaluations ‘by period’ which is typically used to book revaluations monthly or quarterly. If this option is selected, you will want to set the revaluation rule to ‘reverse’ the entry on the 1st of the subsequent period.

Upon running the “revaluation”, Workday pulls out the foreign transactions, including the exchange rate used at the time of transaction. The accounts are revalued based on the offset account posting rules. Running the revaluation process in Workday will generate an entry to post to the ledger.

Currency Translation in Workday

Currency translation in Workday enables you to report on financial balances and activity in a currency other than the company currency. At a high-level, you achieve this in Workday by defining an “Account Translation Rule Set”.

A common Account Translation Rule Set looks like this:

  • Asset – Current
  • Liability – Current
  • Equity – Historic
  • Income – Average
  • Expense – Average

Each time you run translated financial reports, Workday calculates the translated amounts anew based on the account translation rule set. Unlike revaluations in Workday, an actual entry is not booked to the ledger for translation. The translation adjustments are calculated purely as a reporting function and dynamic based on the report period date.

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