Contents

Current Earnings Adjustments
Retained Earnings Adjustments
Multi-currency Adjustments Resulting from Eliminations
Why are my adjustments not working?

Current Earnings Adjustments

Why would you adjust Current Earnings?

During the financial year, Net or Retained Income is added to Current Earnings at the end of each period.

This Period's Current Earnings =

Prior Period's Current Earnings + Net or Retained Income

In Fathom, a consolidated group’s Current Earnings amount is summed from the underlying companies.

Consolidated Group's Current Earnings =

Company A's Current Earnings + Company B's Current Earnings + etc.

In a multi-currency consolidation, the values for each underlying company are translated into the group’s currency before they are summed to calculate the group's total. Underlying companies with the same currency as the consolidated group are not translated.

Multi-currency Consolidated Group's Current Earnings =

Company A's Current Earnings (after translation)

+ Company B's Current Earnings (after translation) + etc.

When translating an underlying company’s currency to the group’s presentation currency, Fathom uses the Average Exchange Rate for the period to translate Profit & Loss values. The End Exchange Rate for the period is used to translate Balance Sheet values.

In a multi-currency consolidation, three exchange rates are at play when Fathom calculates the Current Earnings for the period:

Prior Period’s End FX Rate: The prior period’s Current Earnings amount is translated using the prior period’s End Exchange Rate as Current Earnings is housed on the Balance Sheet.

Current Period’s Average Exchange Rate: The Net or Retained Income is added to Current Earnings from the Profit & Loss, which is translated with the Average Exchange Rate.

Current Period’s End Exchange Rate: Ultimately, the Current Earnings amount is being calculated for the current period, so the current period’s End Exchange Rate is also used in the calculation.

Fathom’s multi-currency methodology reconciles the three different exchange rates used to calculate Current Earnings. To learn more about how Fathom reconciles these exchange rates, please see our Multi-currency Consolidation Methodology article.

The group’s Net or Retained Income is calculated using only the Average Exchange Rate for the period. Because several exchange rates influence the Current Earnings amount, the group’s Change in Current Earnings often does not equal the group’s Net or Retained Income.

An adjustment is needed to match the group’s Net or Retained Income to the Change in Current Earnings amount while ensuring the impact of the exchange rates is recognised in the consolidated financials.

How to Make a Current Earnings Adjustment

You’ll need to make a Current Earnings adjustment with an Eliminations company.

An Eliminations company is an Excel-based company that can be imported into Fathom and added to your consolidated group. It allows for exact eliminations or adjustments, which are often necessary for multi-currency consolidations.

If you don’t already have an Eliminations company for your consolidation, you can download the Excel template at the bottom of this article. You can learn more about creating and updating Eliminations companies from our Eliminations in a Consolidated Group article.

💡 Smart Tip: We don’t want you to pay more for necessary eliminations and adjustments. Contact our team at support@fathomhq.com or via the in-app messenger to discuss the billing for your Eliminations company.

Our recommended method for Current Earnings adjustments follows:

Go to the consolidated group’s Reports
Select Excel Reports from the left sidebar
Download the Multi-currency consolidated financial results, including eliminations report
1. Select to download the Year-to-Date report for the period you are adjusting or closing
2. You can download the Summary or Detailed version of the report
Scroll down to the bottom of the report to view the Restatement notes
Calculate the Adjustment value from the Current Earnings notes:
1. The notes show how the Adjusted Current Earnings amount for the period is calculated for each underlying company. The Adjusted Current Earnings amount is the sum of all the values listed above in the Current Earnings section.
2. Without the ‘Adjustment for the Restatement...’ values, the Adjusted Current Earnings would match the Opening Current Earnings plus Net or Retained Income.
3. Sum the ‘Adjustment for the Restatement...’ values in the report. This will be the Current Earnings Adjustment amount.
  
  📝 Note: If your consolidated group has multiple underlying companies being translated, sum the values for each underlying company. Then, sum those values to calculate the adjustment amount.
In the Eliminations Company Excel file:
1. Add a Currency Translation or FX Reserve account to your Eliminations Company. You can decide what to name the multi-currency adjustment account.
2. Decide how the account is classified. Our recommendation for making Current Earnings adjustments, removes the exchange rate impacts from Current Earnings and transfers them to a multi-currency adjustment account on the Balance Sheet. If you're following our recommended method and steps, then you’ll likely want to classify the multi-currency adjustment account as something other than Current Earnings.
3. For the period you are adjusting or closing, enter the adjustment value calculated in Step 5 as the amount for the multi-currency adjustment account.
4. Add the group’s Current Earnings account to your eliminations company. Enter the balancing movement for the multi-currency adjustment in the period for this account.
5. Save the eliminations company
Add the adjustments to the consolidated group:
1. If you haven’t, import the Eliminations Company into Fathom and add it to the consolidated group.
2. If you've already set up the eliminations company in Fathom, then simply update the financials for the eliminations company.
Ensure the consolidated group is up to date by checking the Update Data section of the consolidated group’s Settings
Go to the group’s Analysis tools to check your work:
1. Select the Financials tool
2. View the group’s Net or Retained Income on the Profit & Loss
3. Switch to the Balance Sheet with the bolded text at the top of the tool
4. Check the Variance column for the group’s Current Earnings account. This is the Change in Current Earnings from one period to the next.
5. If the period you are viewing is not at the start of the financial year, then the variance value should now match the group’s Net or Retained Income.
6. You will also be able to see the multi-currency adjustment account in the group’s financials. This is how the impact of the exchange rate changes is recognised in the consolidated financials.

📝 Note: Fathom does not have an Other Comprehensive Income account classification. Adjustments made to the group’s Profit & Loss could impact the group’s Net or Retained Income. Because of this, our recommended adjustment method does not adjust the group’s Profit & Loss accounts.

Retained Earnings Adjustments

Why would you adjust Retained Earnings?

In Fathom, a consolidated group’s Retained Earnings amount is summed from the underlying companies.

Consolidated Group's Retained Earnings =

Company A's Retained Earnings + Company B's Retained Earnings + etc.

In a multi-currency consolidation, the values for each underlying company are translated into the group’s currency before they are summed to find the group total. Underlying companies with the same currency as the consolidated group are not translated.

Multi-currency Consolidated Group's Retained Earnings =

Company A's Retained Earnings (after translation)

+ Company B's Retained Earnings (after translation) + etc.

When translating an underlying company’s currency to the group’s presentation currency, Fathom uses the End Exchange Rate for the period to translate Balance Sheet values.

Changing exchange rates throughout the financial year impact the Retained Earnings amount.

Prior Period’s End FX Rate: The prior period’s Retained Earnings amount is translated using the prior period’s End Exchange Rate.

Current Period’s End Exchange Rate: The Retained Earnings amount for the current period is translated using the current period’s End Exchange Rate.

Fathom’s multi-currency methodology reconciles the changing exchange rates. To learn more about how Fathom reconciles these exchange rates, please see our Multi-currency Consolidation Methodology article.

Because the Retained Earnings amount is translated according to the changing exchange rates, the group’s Retained Earnings amount may change from period to period throughout the financial year.

An adjustment is needed for the multi-currency group’s Retained Earnings value to remain constant from one period to the next while ensuring the impact of the changing exchange rates is recognised in the consolidated financials.

How to Make a Retained Earnings Adjustment

You’ll need to make a Retained Earnings adjustment with an Eliminations company.

If you don’t already have an Eliminations company for your consolidation, you can download the template at the bottom of this article. You can learn more about creating and updating Eliminations companies from our Eliminations in a Consolidated Group article.

💡 Smart Tip: We don’t want you to pay more for necessary eliminations and adjustments. Contact our team at support@fathomhq.com or via the in-app chat to discuss the billing for your Eliminations company.

Our recommended method for Retained Earnings adjustments follows:

Go to the consolidated group’s Reports
Select Excel Reports from the left sidebar
Download the Multi-currency consolidated financial results, including eliminations report
1. Select to download the Year-to-Date report for the period you are adjusting or closing
2. You can download the Summary or Detailed version of the report
Scroll down to the bottom of the report to view the Restatement notes
Calculate the Adjustment value from the Retained Earnings notes:
1. The notes show how the Adjusted Retained Earnings for the period is calculated for each underlying company in the consolidated group. The Adjusted Retained Earnings is the sum of all the values listed above in the Retained Earnings section.
2. Without the ‘Adjustment for the Restatement...’ value(s), the Adjusted Retained Earnings would match the prior period’s Retained Earnings.
3. Sum the ‘Adjustment for the Restatement...’ value(s) in the report. This will be the Retained Earnings Adjustment amount.
  
  📝 Note: If your consolidated group has multiple underlying companies being translated, sum the values for each underlying company. Then, sum those values to calculate the adjustment amount.
In the Eliminations Company Excel file:
1. Add a Currency Translation or FX Reserve account to your Eliminations Company. You can decide what to name the multi-currency adjustment account.
2. Decide how the account is classified. Our recommendation for making Retained Earnings adjustments, removes the exchange rate impacts from Retained Earnings and transfers them to a multi-currency adjustment account on the Balance Sheet. If you're following our recommended method and steps, then you’ll likely want to classify the multi-currency adjustment account as something other than Retained Earnings.
3. For the period you are adjusting or closing, enter the adjustment value calculated in Step 5 as the amount for the multi-currency adjustment account.
4. Add the group’s Retained Earnings account to your eliminations company. Enter the balancing movement for the multi-currency adjustment in the period for this account.
5. Save the eliminations company
Add the adjustments to the consolidated group:
1. If you haven’t, import the Eliminations Company into Fathom and add it to the consolidated group.
2. If you've already set up the eliminations company in Fathom, then simply update the financials for the Eliminations Company.
Ensure the consolidated group is up to date by checking the Update Data section of the consolidated group’s Settings
Go to the group’s Analysis tools to check your work:
1. Select the Financials tool
2. Switch to the Balance Sheet with the bolded text at the top of the tool
3. Check the Variance column for the group’s Retained Earnings account. This is the Change in Retained Earnings from one period to the next.
4. If the period you are viewing is not at the start of the financial year, then the variance value should now be 0.
5. You will also be able to see the multi-currency adjustment account in the group’s financials. This is how the impact of the changing exchange rate is recognised in the consolidated financials.

Multi-currency Adjustments Resulting from Eliminations

Why would you need to make adjustments after eliminations?

Fathom calculates the group’s financials after the underlying companies are translated to the group’s presentation currency.

Multi-currency Consolidated Group's Financials =

Company A's Financial Results (after translation)

+ Company B's Financial Results (after translation) + etc.

If an underlying company's currency matches the group's currency, then the underlying company's financials will not be translated.

Profit and Loss Eliminations

If the exchange rate at the time the intercompany transaction was recorded on the Profit & Loss in the underlying companies does not match the Average exchange rate for the period, then eliminations will likely result in Unrealised Gains/Losses for the group.

These Unrealised Gains/Losses will likely impact the group's Net or Retained Income. However, this impact on Net Income will not automatically carry over to the group’s Current Earnings on the Balance Sheet.

A multi-currency adjustment will need to be made to recognise the impact of the changing exchange rates on the group’s Current Earnings.

Balance Sheet Eliminations

If the exchange rate at the time the intercompany transaction was recorded on the Balance Sheet in the underlying companies does not match the Period-End exchange rate, then eliminations will likely result in an out of balance Balance Sheet for the group.

A multi-currency adjustment must be made to balance the group’s Balance Sheet and recognise the impact of the changing exchange rates.

Example: Multi-currency Adjustment Resulting from Eliminations

Example:

Company C and Company D are in a multi-currency consolidation.

Company C's currency is the British Pound. Company D's currency is the US Dollar.

The group's currency is the British Pound.

Company C provides consulting services to Company D. Although Company D has received the services, it has not yet paid for them in Cash. The underlying companies and consolidated group use the accrual accounting method.

Company C invoiced Company D £800 for the consulting services.

The USD to GBP exchange rate was .80 at the time of the invoice. Company D was invoiced $1,000 for the consulting services.

Fathom consolidated the financials for the group. Company D's financial results were translated to the British Pound:

Company D's $1,000 Expense was translated using the Average Exchange Rate for the period
- Average Exchange Rate: 0.75
- $1,000 x 0.75 = £750 Expense
Company D's $1,000 Accounts Payable amount was translated using the Period End Exchange Rate
- Period End Exchange Rate: 0.78
- $1,000 x 0.78 = £780 in Accounts Payable

The following eliminations were made as a result of the intercompany transaction:

Company C's £800 Revenue was eliminated
Company D's £750 Expense was eliminated
Company C's £800 in Accounts Receivable was eliminated
Company D's £780 in Accounts Payable was eliminated

The Eliminations resulted in the group's Net or Retained Income changing by £50 in Unrealised Gains/Losses. This change to the group's Net Income has not been automatically carried over to the group's Current Earnings.

The Eliminations also resulted in the group's Balance Sheet becoming out of balance by £20.

Multi-currency adjustments can be made in an Eliminations company to match the group's Net Income to the Change in Current Earnings for the period. An adjustment can also be made to balance the Balance Sheet.

How to Make an Adjustment Resulting from Multi-Currency Eliminations

You’ll likely need to make the multi-currency adjustment with an Eliminations company.

💡Smart Tip: We don’t want you to pay more for necessary eliminations and adjustments. Reach out to our team at support@fathomhq.com or via the in-app messenger to discuss the billing for your Eliminations company.

The exact adjustment entries depend on the intercompany transaction(s) at play.

Here are some tips when making multi-currency adjustments that result from eliminations:

We recommend making the Current Earnings Adjustment and Retained Earnings Adjustment before making any multi-currency eliminations adjustments.
- Making those adjustments first will help you determine if additional adjustments need to be made and will make it easier for you to check the impacts of your eliminations adjustment(s).
Use the Multi-currency consolidated financial results, including eliminations Excel report
- Download the report for the period you are adjusting. For example, if you made eliminations for the month of July, download the monthly report for July.
- Compare the Total Before Eliminations and Consolidated Totals (After Eliminations) columns.
- The Net Income line will show how eliminations have impacted the group's Net Income.
  - This can be useful for identifying the potential adjustment amount for Current Earnings.
- The Balance Check will inform you if your consolidated group is out of balance. If the group was in balance before eliminations and is out of balance after eliminations, check that the correct eliminations have been made.
  - If the correct eliminations have been made, then the Balance Sheet is likely out-of-balance because of the changing exchange rates. An adjustment will be needed to bring the group’s Balance Sheet back into balance. You can easily determine if the adjustment needs to be a debit or credit with the report.
  - If you made automated full account eliminations, the multi-currency adjustment might balance the Unrealised Gains/Losses resulting from the automated Balance Sheet eliminations. However, the adjustment in the Eliminations Company may look unbalanced because it balances the automated full account eliminations occurring outside of the Eliminations Company.
If you’re struggling to keep track of all the eliminations and adjustments at play, you may want to change how you organise the Eliminations Company:
- You may want to have multiple adjustment accounts in your Eliminations Company (e.g. Currency Translation – Current Earnings, Currency Translation – Retained Earnings, Currency Translation – Elimination A, etc.)
  - You can use headings in the group’s Chart of Accounts to group multi-currency adjustments with the same classification.
- Automated full account eliminations are made on the group’s Chart of Accounts in Fathom. You may want to use the Eliminations Company to make full account eliminations instead of the automated eliminations process. This will allow you to view all the eliminations and adjustments in the Eliminations Company.
Check your work with the group’s Financials tool in Analysis:
- You can quickly switch between the Profit & Loss and Balance Sheet using the bolded text at the top of the tool.
- You can also change the period you’re viewing with the period selector in the upper right corner of the tool.
- Ensure the group’s Net or Retained Income matches the Change in Current Earnings during the financial year. The Variance column for the Current Earnings on the Balance Sheet shows the Change in Current Earnings from one period to the next.
- If the group’s Balance Sheet is out of balance, the tool will inform you of the amount when you view it.

Why is my multi-currency adjustment not working as expected?

💡 Smart Tip: If you’re losing track of the adjustments and eliminations at play, you may want to have multiple adjustment accounts in your Eliminations Company (e.g. Currency Translation – Current Earnings, Currency Translation – Retained Earnings, etc.).

If your multi-currency consolidation’s results are not as expected after following the adjustment steps above, check the following:

The Multi-currency consolidated financial results, including eliminations Excel report:
1. When using our recommended method for adjustments, the Year-to-Date report for the period being closed or adjusted must be used to calculate the Current Earnings and Retained Earnings adjustments.
2. If you are making adjustments for multiple periods, then you must download the Year-to-Date report for each period to calculate the adjustment amount for that period.
  1. Example: If you are adjusting July, August, and September, you must download the Year-to-Date report for July to calculate July’s adjustments. Then, download the Year-to-Date report for August to calculate August’s adjustments, etc.
3. If your consolidated group is out-of-balance, ensure it was not out-of-balance before eliminations. If it was, the issue likely lies with the underlying companies' financials.
The Eliminations company:
1. Ensure the Eliminations Company’s currency matches the consolidated group’s currency. You can change the Eliminations Company’s currency in the Company Profile section of the company’s Settings.
2. Ensure you’ve saved changes to the Eliminations Company in Excel.
3. Ensure the Eliminations Company has been updated with the saved changes.
The consolidated group:
1. Check that the Eliminations Company has been added to the consolidated group.
2. Go to the Update Data section of the consolidated group’s Settings and trigger a manual update to ensure the group is synced with the underlying companies.
The group’s Financials tool in Analysis:
1. Check that you are viewing the correct period. You can select the period in the upper right corner of the tool.
Ensure eliminations are not at play:
1. If you're checking the results of a Current Earnings Adjustment and the Change in Current Earnings still does not match the Net or Retained Income for the group, you may need to make another adjustment to address the impacts of eliminations.

If you’ve checked the above and are still seeing unexpected results, contact our Support Team at support@fathomhq.com. Please provide us with the following information:

A copy of the Multi-currency consolidated financial results, including eliminations Excel report(s) you’re referencing
A copy of the Eliminations Company Excel file
Tell us which period(s) you are adjusting.
Tell us the results you expect to see and how they do not match those you see.

You can also contact our Support Team via the in-app messenger.

❗Notice: Our Support Team can advise our users on how to make multi-currency adjustments in Fathom, especially regarding our recommended methodology. Our Support Team cannot advise users on whether an adjustment is necessary or correct.

Additional knowledge & common questions

Eliminations Company Template:

Eliminations Company Template.xlsx