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Foreign Currency Financial Reporting from Euro to Yen to Yuan: A Guide to Fundamental Concepts and Practical Applications by Robert Rowan

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APPENDIX C

Exchange Rate Requirements

Background: The following documentation comes from a company’s financial reporting system implementation. The document is presented “as is” from an implementation to provide insight into what a simple requirement document might look like. The company receives daily spot exchange rate feeds from a data provider for over 80 currencies. The requirements specify:

  • The types of exchange rates required
  • How averages are to be calculated
  • How “constant currency” will be defined and calculated
  • How to populate best-estimate (“VIEW”) forecast exchange rates.
  • How to calculated, populate, and adjust high and low exchange rate forecasts for currency scenario analysis
  • Constant year is not addressed specifically since it simply uses the prior year’s rate for the current year

For the forecasted rates, including the high and low estimates of future rates, the document specifies the automated manner in which the system populates the application. No user intervention is required. If users desire a change to a forecasted rate, the method in this document can be followed, or the user can use the financial reporting application’s user interface directly to make a rate change.

DEFINITION OF ACTUAL RATES

ACTUAL—Exchange Rate Set ACTUAL

For Actual exchange rates, the financial reporting system requires the following types of data at a month level; therefore, month equals period:

  • Period average exchange rate
  • Period closed exchange rate
  • Period open exchange rate (defined as the ...

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