Contents:


Overview

Each company can have just one functional currency. By using the multi-currency consolidation feature, you can present the consolidated group’s financial statements in one of several different presentation currencies. See full list of currencies.

For example, a company based in the UK, will likely use £GBP as its functional currency, but in a consolidated group this company could present its financial statements in EUR or USD as the presentation currency.

Each consolidated group can present its financial statements using only one presentation currency. This currency can be changed in ‘Step 1 - Update Data’ of the group’s Settings.


Which exchange rates are used for calculating monthly financial statements?

To translate financial statements from the individual company’s original, functional currency to the group’s presentation currency, Fathom uses:

  • The average exchange rate over the month to calculate Profit & Loss accounts

  • The month end exchange rate for calculating Balance Sheet accounts

Fathom uses exchange rates from Open Exchange Rates.

Within Fathom you can also set your own Balance Sheet and Profit & Loss exchange rates to be applied to the consolidated group (See ‘Using Exchange Rates in Fathom’).


Which exchange rates are used for calculating quarterly and annual financial statements?

Fathom calculates or translates quarterly and annual financial statements by:

  1. Translating financial statements for each month within the quarter or year using the monthly methodology described above.

  2. Combining the translated P&L results from months into quarters or years. Only the period end exchange rate is used to translate the Balance Sheet.

  3. Summing results from the multiple companies to calculate the group’s financial results

This means, the impacts of different exchange rates for each month in a quarter or year are retained in the quarterly and yearly financial statements.

Example: For a quarterly financial statement, up to 4 exchange rates are used (3 rates for the P&L for each month and 1 rate for the Balance Sheet). In other words, the quarterly P&L accounts are the sum of monthly accounts after translation and Balance Sheet account values are based on the quarter end exchange rate.

💡Pro Tip: For Month-to-date, Quarter-to-date, and Year-to-date financial statements, the exchange rate for the most recently completed month will be applied to Balance Sheet accounts. For any months that have yet to complete, the average exchange rate from the most recently completed calendar month will be used to translate P&L accounts.


Methodology for the Calculation of Current and Retained Earnings

For each company in the consolidated group, Current and Retained Earnings are calculated or translated using the ‘Period End exchange rate’ for the reporting period. When creating reports for later periods, Fathom re-calculates Current and Retained Earnings accounts, using the ‘Period end exchange rate’ for the new period.

Additionally, Fathom includes Current and Retained Earnings notes on the consolidated Balance Sheet to reconcile:

  1. Any currency calculation or translation difference that is a result of different exchange rates being used to translate the P&L (average exchange rate) and Balance Sheet (period end exchange rate).

  2. Any re-calculation or re-translation that occurs from period to period as the average and period end exchange rates differ from period to period.

Current and Retained Earnings Notes

You can view the Current Earnings and Retained Earnings notes at the bottom of the ‘Multi-currency consolidated financials, including eliminations’ Excel report. You can access this report by:

  1. Going to the ‘Report Centre’ for the consolidated group

  2. Selecting ‘Excel Reports’ from the left side menu

  3. Downloading the ‘Multi-currency consolidated financials, including eliminations’ report


How are these notes calculated?

Current Earnings Notes

Current Earnings is the link between the P&L and the Balance Sheet. This note reconciles the differences between Retained or Net Income on the Profit & Loss and Current Earnings on the Balance Sheet that occur because of the different exchange rates used for the two financial statements. The different exchange rates used between periods are also taken into account.

The Current Earnings Notes on the consolidated Balance Sheet will look like this:

💡Pro Tip: Though the notes explain the calculation of the ‘Adjusted Current Earnings’, Fathom is not actually adjusting the Current Earnings amount. Instead, the amount is simply being re-calculated according to the appropriate exchange rates.

Note

Reasoning

Calculation

Opening Current Earnings

This is the amount of Current Earnings according to the prior period.

This amount should match the Current Earnings amount on the Balance Sheet for the prior period.

Opening Current Earnings =

Prior period Current Earnings (before translation)

x

Prior period end exchange rate

Retained Income

This is the Retained Income amount for the current period.

If no dividends are paid out, then this will be the Net Income for the current period.

Retained Income =

Current period Retained Income (before translation)

x

Current period average exchange rate

Adjustment for the restatement of Current Earnings

Reconciles the varying Balance Sheet exchange rates used for different reporting periods by multiplying the prior period’s Current Earnings by the difference between the two exchange rates.

Adjustment for restatement of Opening Current Earnings =

Prior Period’s Current Earnings (before translation)

x

[Current period end exchange rate (End) – Prior period end exchange rate (End)]

Adjustment for the restatement of Retained Income

When looking at a Year to Date report, an ‘Adjustment for the restatement of Retained Income’ will be listed for each month of the year to capture the different average exchange rates used from month to month.

Reconciles the different exchange rates used for the P&L (Period Average) and Balance Sheet (Period End) by multiplying the current period’s Retained Income (before translation) by the difference between the two exchange rates.

Adjustment for the restatement of Retained Income =

Retained Income for the current period (before translation)

x

[Current period rate (End) – Current period rate (Avg)]

Other Current Earnings movements

This note only appears if Fathom’s calculated Current Earnings does not match the Current Earnings amount in the source accounting system.

Sometimes there is a difference between the Current Earnings amount calculated by Fathom and the amount stated in the source accounting system.

These differences are the result of movements in the financials that Fathom cannot attribute to exchange rate differences. These movements could be the result of a variety of reasons, including paying out dividends or issuing stock through Current Earnings or ownership of the company changing.

In these instances, the source accounting system is always considered the ultimate source of truth.

Therefore, the ‘Other Current Earnings movements’ note will reconcile the difference between Fathom’s calculated Current Earnings and the Current Earnings stated in the source accounting system. This way the ‘Adjusted Current Earnings’ amount will tie to the amount on the Balance Sheet.

Other Current Earnings Movements =

[Current Earnings for the current period * Current period rate (End)]

-

Opening Current Earnings (as calculated above)

-

Retained Income (as calculated above)

-

Adjustment for the restatement of Current Earnings

-

Adjustment for the restatement of Retained Income

Adjusted Current Earnings

The above calculations result in the Current Earnings value listed on the consolidated Balance Sheet, which now takes into account:

Opening Current Earnings amount

+

Retained Income

+

The different exchange rates being used to translate Current Earnings from period to period

+

The different exchange rates being used to translate Retained Income on the P&L and Balance Sheet

+

Any underlying movements impacting Current Earnings or Retained Income not accounted for by exchange rate differences

Adjusted Current Earnings

=

Opening Current Earnings (as calculated above)

+

Retained Income (as calculated above)

+

Adjustment for the Restatement of Current Earnings

+

Adjustment for the restatement of Retained Income

+

Other Current Earnings Movements


Retained Earnings Notes

Retained Earnings Notes account for the varying exchange rates used to translate Retained Earnings from period to period.

The Retained Earnings Notes on the consolidated Balance Sheet will look like the following:

💡Pro Tip: Though the notes explain the calculation of the ‘Adjusted Retained Earnings’, Fathom is not actually adjusting the Retained Earnings amount. Instead, the amount is simply being re-calculated according to the appropriate exchange rates.

Some of the Retained Earnings Notes calculations depend on the reporting period as Current Earnings are rolled into Retained Earnings after the close of the financial year.

The exchange rate used to calculate Current Earnings at the end of the previous financial year may be different from the exchange rate used to calculate Retained Earnings in the current financial year; yet, the current year’s Retained Earnings include the previous year’s Current Earnings at the start of the new financial year. Therefore, if the reporting period is at the start of the new financial year, the notes calculations will reconcile the differences between these exchange rates.

If the reporting period you’re reviewing is the start of a new financial year, then you can skip to those calculations.

If the period for the company is NOT the first period of the company’s Financial Year:

Note

Reasoning

Calculation

Opening Retained Earnings

Retained Earnings will simply be carried over from the previous period if it is not the start of the financial year. This is because the Current Earnings are rolled into Retained Earnings until the start of the next financial year.

Calculated Retained Earnings =

Prior Period’s Retained Earnings

x

Prior Period’s end exchange rate

Adjustment for the restatement of Opening Retained Earnings

Reconciles the differing exchange rates used to translate Retained Earnings changing from period to period by multiplying the prior period’s Retained Earnings amount by the difference between the two exchange rates.

Adjustment for the restatement of Opening Retained Earnings =

Prior Period’s Retained Earnings (before translation)

x

(Current period end exchange rate – Prior period end exchange rate)

Other Retained Earnings movements

This note only appears if Fathom’s calculated Retained Earnings does not match the Retained Earnings amount in the source accounting system.

Sometimes there is a difference between the Retained Earnings amount calculated by Fathom and the amount stated in the source accounting system.

These differences are the result of movements in the financials that Fathom cannot attribute to exchange rate differences. These movements could be the result of a variety of reasons, including paying out dividends or issuing stock through Retained Earnings, revaluing assets and running the gain/loss revaluation through Retained Earnings, or ownership of the company changing.

In these instances, the source accounting system is always considered the ultimate source of truth.

Therefore, the ‘Other Retained Earnings movements’ note will reconcile the difference between Fathom’s calculated Current Earnings and the Current Earnings stated in the source accounting system. This allows the ‘Adjusted Retained Earnings’ to match the Retained Earnings amount on the Balance Sheet.

Other Retained Earnings movements =

[Retained Earnings for the current period * Current period rate (End)]

-

Opening Retained Earnings (as calculated above)

-

Adjustment for the restatement of Opening Retained Earnings

Adjusted Retained Earnings

The above calculations result in the Retained Earnings value listed on the consolidated Balance Sheet, which now takes into account:

The previous period’s Retained Earnings amount without Current Earnings rolling into Retained Earnings

+

Different exchange rates being used to translate Retained Earnings from period to period

+

Any underlying movements impacting Retained Earnings not accounted for by exchange rate differences

Adjusted Retained Earnings =

Opening Retained Earnings

+

Adjustment for the Restatement of Retained Earnings

+

Other Retained Earnings movements

If the period for the company IS the first period of the company’s Financial Year:

Note

Reasoning

Calculation

Opening Retained Earnings

Retained Earnings will be carried over from the previous period and the previous year’s Current Earnings will be rolled into the Retained Earnings as it is the start of a financial year.

Calculated Retained Earnings =

[Prior period’s Retained Earnings (before translation) * Prior period rate (End)]

+

[Prior period’s Current Earnings (before translation) * Prior period rate (End)]

Adjustment for the restatement of Opening Retained Earnings

Reconciles the differing exchange rates used to translate Retained Earnings and Current Earnings changing from period to period by multiplying the prior period’s Retained Earnings and Current Earnings amounts by the difference between the two exchange rates.

Adjustment for the restatement of Opening Retained Earnings =

[Prior period’s Retained Earnings (before translation) *

(Current period end exchange rate – Prior period end exchange rate)]

+

[Prior period’s Current Earnings (before translation) *

(Current period end exchange rate – Prior period end exchange rate)]

Other Retained Earnings movements

This note only appears if Fathom’s calculated Retained Earnings does not match the Retained Earnings amount in the source accounting system.

Sometimes there is a difference between the Retained Earnings amount calculated by Fathom and the amount stated in the source accounting system.

These differences are the result of movements in the financials that Fathom cannot attribute to exchange rate differences. These movements could be the result of a variety of reasons, including paying out dividends or issuing stock through Retained Earnings, revaluing assets and running the gain/loss revaluation through Retained Earnings, or ownership of the company changing.

In these instances, the source accounting system is always considered the ultimate source of truth.

Therefore, the ‘Other Retained Earnings movements’ note will reconcile the difference between Fathom’s calculated Current Earnings and the Current Earnings stated in the source accounting system. This allows the ‘Adjusted Retained Earnings’ to match the Retained Earnings amount on the Balance Sheet.

Other Retained Earnings movements =

[Retained Earnings for the current period (before translation) * the current period’s end exchange rate]

-

Opening Retained Earnings (as calculated above)

-

Adjustment for the restatement of Opening Retained Earnings

Adjusted Retained Earnings

The above calculations result in the Retained Earnings value listed on the consolidated Balance Sheet, which now takes into account:

The previous period’s Retained Earnings amount with Current Earnings rolling into Retained Earnings

+

Different exchange rates being used to translate Retained Earnings from period to period

+

Any underlying movements impacting Retained Earnings not accounted for by exchange rate differences

Adjusted Retained Earnings =

Opening Retained Earnings

+

Adjustment for the Restatement of Retained Earnings

+

Other Retained Earnings movements

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