Decentralization-related inconsistencies. Inconsistent remeasurement practices often arise when accounting processes are decentralized. Decentralization does not, de facto, mean that practices will be inconsistent, but when processes are decentralized, consistency and control are much more difficult to achieve. In particular, the following aspects of decentralization often lead to inconsistent remeasurement practices:

Understanding of the ASC 830 Foreign Currency Translation (FAS52) regulations often varies across geographies, leading to regionally disparate remeasurement processes.
Even where the types of accounts used are consistent across entities, the use of those accounts is not always consistent. Depending on its business needs, a given legal entity may use only a few accounts at its disposal. This is especially common with cash accounts. Sometimes an entity dumps unbalanced and unmatched transactions into "other" accounts.
In many cases, an entity is not well-versed in the types of accounts available and their best use, so it simply copies the practices of other entities, even when their business needs differ.

Transaction currency/local currency inconsistencies. In addition to the self-inflicted wounds caused by inconsistent practices for remeasurement of accounts, there are transaction currency/local currency (TC/LC) issues that arise from individuals or entities improperly posting and/or clearing transactions. Improper TC/LC practices include, for example, clearing local-currency balances but not clearing transaction-currency balances, back-dating transactions, and inconsistent rate conventions. Sometimes the improper TC/LC posting and/or clearing stems from a lack of controls or enterprisewide best practices. Other times, it is a mistake or the result of an individual error.

Instant Insights /

Data Management in Multicurrency Accounting

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