When Invoices and Revenue Schedules are converted to the entity’s base currency using different exchange rates, Ordway offers a feature to automatically adjust deferred revenue and recognize a corresponding gain / loss upon financial close. 

Read More: 

• Automate Realized Gain / Loss for Foreign Currency Transactions
• Automate Unrealized Gain / Loss for Foreign Currency Transactions

Billing and Revenue Schedules have been updated to facilitate the calculation of a monthly Deferred Revenue Adjustment. 

A new Journal Entry type/source type: DeferredRevFXAdj is used to post the deferred revenue adjustments. The Journal Entry source is the Charge’s Revenue Schedule. 

Preconditions: 

• Related setting must be enabled via Menu > Setup > Finance in order to use this feature. 

Enable Adjust Deferred Revenue for Foreign Exchange

1. Navigate to Menu > Setup > Finance. 
2. Enable Adjust Deferred Revenue for Foreign Exchange in the Multi-currency Accounting section.
   
3. Save when finished.
   
   

Billing Schedules for Deferred Revenue Adjustments

When this setting is enabled, the following fields are added to the Billing Schedule: 

• Cumulative Billing: The sum of all. Invoiced Billing Schedule Lines (in foreign currency). 
• Effective Billing FX: Cumulative billing (in base currency) / cumulative billing (in foreign currency). 

Revenue Schedules for Deferred Revenue Adjustments

When this setting is enabled, the following fields are added to the Revenue Schedule: 

• Cumulative Revenue: The sum of Posted Revenue Schedule Lines (in foreign currency). 
• Effective Billing FX: Cumulative revenue (in base currency) / cumulative revenue (in foreign currency). 
• Cumulative Adjustment: The sum of all prior deferred revenue adjustments. 

How and When Adjustments are Determined

During the Financial Period Close process, deferred revenue adjustments are created and posted through a Journal Entry. The Journal Entry will either decrease or increase deferred revenue with an offsetting debit or credit to revenue. 

Deferred Revenue Adjustment is calculated for each charge as follows: 

Overlap * (Effective Billing Exchange Rate – Effective Revenue Recognition Exchange Rate) – Cumulative FX adjustments

The calculation is facilitated by the following fields added to Billing and Revenue Schedules:

• Overlap: The lesser of cumulative billing and cumulative revenue (in foreign currency).
• Effective Billing Exchange Rate: Cumulative billing (base currency) / cumulative billing (foreign currency).
• Effective Revenue Exchange Rate: Cumulative revenue (base currency) / cumulative revenue (foreign currency). 
  • Cumulative revenue is exclusive of prior adjustments.
• Cumulative FX adjustments: Cumulative adjustments throughout the life of the charge.

An adjustment is calculated individually for each charge and posted through a Journal Entry as part of the financial period close:

• A Journal Entry  with type = DeferredRevFXAdj is created to post the deferred revenue adjustment.
• The Journal Entry posts to the charge’s deferred revenue account (Debit account on revenue schedule transaction type) and the charge’s revenue account (Credit account on revenue schedule transaction type) depending on the output of the formula above: 
• Positive value = DR deferred revenue, CR revenue
• Negative value = DR revenue, CR deferred revenue

Deferred Revenue Adjustment Summary

After the Financial Period Close Wizard is complete, the Summary Entries table on the Financial Period Close screen includes a section for DeferredRevFXAdj Journal Entries.