On currency in credit card expense transactions – Part 2

by Eugen Glasow

In the previous blog On currency in credit card expense transactions – Part 1 we have explored a case where the credit card currency and the local accounting currency in D365FO did match. But what if the card is issued in a currency different from the accounting currency of the legal entity?

Case 2: credit card currency <> accounting currency

For example, Hungarian employees (the official currency of Hungary is the Forint, abbreviated as HUF) may be given credit cards billed in Euro, since they are surrounded by the Euro zone. If we follow the same logic as before, if such a credit card statement is expressed in EUR, then it must be posted in EUR into the AP subledger:

  • 01.06.2019 Paid a hotel in Bratislava 500 EUR (the credit card provider applied the cross rate of 1.00)
  • 04.06.2019 Posted in AP subledger as 500 EUR (the daily rate was 322 HUF/EUR)
  • 30.06.2019 The credit card balance of June was withdrawn by the bank from the employee’s daily account in HUF @323,39 = 161 695 HUF. This is not recorded in D365FO for personal credit cards.
  • 30.06.2019 An AP revaluation is performed in D365FO. The liability is now worth 161 450 HUF at the current exchange rate of 322,9 HUF/EUR
  • 01.07.2019 The employee is reimbursed in the local currency by the employer with 161 450 HUF @322,9 HUF/EUR.

As a result, the employee will suffer a loss of 245 HUF but have to arrange himself/herself, as the benefits of travelling with an Euro card should overweigh any potential losses from the imperfect execution in D365FO by far.

Case 3: credit card currency <> accounting currency <> local currency

What if the trip was not to Slovakia (EUR) but to the Czech Republic who refused to adopt the Euro and retained their own Czech koruna (CZK)? Now all 3 currencies in the transaction are different:

  • The legal entity Accounting currency = HUF
  • The transaction Local currency = CZK
  • The Credit card Currency = EUR

The equation is still the same, the credit card balance is posted as a Forex liability in EUR. In the General Ledger voucher / accounting distribution the cross rate CZK -> HUF is kind of triangulated through the Euro: CZK -> EUR -> HUF where CZK -> EUR is the rate applied by the credit card institution.

With that in mind, let us summarize the different business cases with the 3rd being the most generic and sound:

Case 1 Case 2 Case 3
Credit card Currency CHF EUR EUR
CC “Local” currency THB EUR CZK
Accounting currency CHF HUF HUF
Expense line THB EUR CZK
Line itemizations THB EUR CZK
Acc. distribution THB EUR CZK*
GL voucher Dr THB – Cr THB** Dr EUR – Cr EUR Dr CZK – Cr CZK**
AP subledger CHF EUR EUR

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(*) The accounting currency HUF equivalent i.e. ‘amount MST’ is evaluated through the rate EUR -> HUF

(**) Note the currency mismatch between the AP and GL ledgers. This spoils the AP ledger account with transactions in foreign currencies and may potentially kick the subledgers off balance.

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