Statutory Currency

You have the option to use an additional base currency for reporting purposes. This second currency is known as the statutory currency. The need for a statutory currency arises from a combination of global IFRS requirements and local GAAP in some countries. The statutory currency is set at the domain level, and is inherited by the entities assigned to the domains. See Setting Up Domains.

The need for a statutory currency is most likely to arise in a country that is geographically close to a strong currency zone (for example, Mexico and Poland), where the country itself has another local currency. Companies operating in countries close to strong currency zones, such as the Euro and US dollars, might use the stronger currency as their base currency (functional currency). However, local auditors and tax controllers can mandate that companies submit their declarations and financial reports in the local currency of the country. In these cases, the local country currency becomes the organization’s statutory currency.

Example: A multinational corporation has a subsidiary in Mexico. In the Mexican subsidiary, most business is conducted in USD, which is the base currency. However, all reports that the subsidiary must produce for the Mexican government are in Mexican Pesos, which is the statutory currency.

In some countries, the use of the statutory currency can be limited to a few reports, such as tax and basic GL reports. However, in other countries, companies can be required to submit many reports in the local statutory currency; for example, balance sheet, income statement, daybooks, general ledger, sub-ledgers, and tax declaration reports. To meet these requirements, you can run all GL, AR, AP, and tax reports to display output in statutory currency.

The system uses a dedicated statutory exchange rate when converting transaction amounts to and from the statutory currency. However, you can choose to use the normal accounting exchange rate for statutory currency calculation. See Exchange Rate Types. All GL transactions contain statutory currency amount fields on the same level as the base currency amount fields, including tax transactions.

You can revaluate transactions in transaction currency, relative to the statutory currency. The Currency tab of GL Account Create contains account settings for transaction currency revaluation in statutory currency. See Journal Entries and Daybook Security.

The concept of statutory currency does not exist in the operational modules. Therefore, when operational transactions are fed into Financials using Operational Transaction Post and Invoice Print and Post, the system calculates the GL transaction amounts in statutory currency, and adds these values to the posted transactions. The system converts the base currency amount to statutory currency using the statutory exchange rate type.

See Inventory Exchange Rate for details on how the system converts inventory transactions on inventory accounts to statutory currency.

Use the Statutory-Currency Utility (36.25.90) to change the statutory currency code of a domain to a different currency, even after transactions have been posted in the domain. The utility reinitializes the statutory currency amount fields for all transactions in the domain.