For each country outside of the United States where UCSF has established operations, financial transactions are recorded in PeopleSoft using a foreign Business Unit. Intended only for use by UCSF Global Programs accounting teams, the Business Units allow for the recording and reporting of transactions in each country's respective local currency. Current Business Units, countries and corresponding currencies are as follows:
- SFNKE – Kenya, Kenyan Shilling (KES)
- SFNMZ – Mozambique, Mozambican Metical (MZN)
- SFNNA – Namibia, Namibian Dollar (NAD)
- SFNTZ – Tanzania, Tanzanian Shilling (TZS)
- SFNUG – Uganda, Ugandan Shilling (UGX)
- SFNZA – South Africa, South African Rand (ZAR)
- SFNLA – Laos, Laotian Kip (LAK)
UCSF maintains a LOCAL ledger in PeopleSoft for each foreign Business Unit. Journal lines are entered on the LOCAL ledger to record transactions in the operating currency of the country. At the end of each month, approved journals are converted from the foreign currency to United States Dollars (USD) in the ACTUALS ledger. UCSF applies conversion rates to better represent the actual cost of expenses and minimize gains or losses due to fluctuations in exchange rates over time.
Key Definitions
- Foreign currency: any currency that is not USD
- Operating currency: the currency of day-to-day operations in a country; for example, the currency used at the market, to pay rent or utilities, etc.
- Reporting currency: the currency the consolidated organization uses to report financial results; UCSF’s reporting currency is USD
- ACTUALS ledger: the ledger used by UCSF for reporting in the U.S. for all Business Units; transactions on the ACTUALS ledger will always be recorded in USD
- LOCAL ledger: the ledger for recording activity in the operating currency for the Business Unit for the purposes of reporting in that country; each Business Unit has one LOCAL ledger
- Current rate: the exchange rate from a foreign currency to USD at a point in time; this exchange rate is used to convert asset and liability ending balances at the end of each month
- Average rate: the exchange rate from a foreign currency to USD averaged over a one-month period of time; this exchange rate is used at the end of each accounting period to convert revenue and expense transactions recorded during the month
- Historical rate: the exchange rate from a foreign currency to USD at the point in time the transaction was recorded; this exchange rate is used to convert net position balances.
Converting Foreign Currency for Financial Reporting
At the end of each month-end period, amounts in the LOCAL ledger are converted to USD and recorded in the ACTUALS ledger. The exchange rate methodology used is based on the account type.
| Account Type | Exchange Rate Type |
|---|---|
| Asset | current rate on the last calendar day of the month |
| Liability | current rate on the last calendar day of the month |
| Net position | historical rate of the transactions |
| Revenue | average rate |
| Expense | average rate |
| Transfer | average rate |
An automated process runs in PeopleSoft to perform the foreign currency exchange based on published rates from OANDA. Authorized users can run the “EXCH_RATES” query to view foreign currency exchange rates stored in PeopleSoft tables by month.
Understanding Variances due to Currency Conversion
Foreign exchange translation differences are recorded to a foreign exchange gain/loss general ledger account during each month-end close and are only visible when financial reports are run from the ACTUALS ledger. Differences may exist when the trial balance in the LOCAL ledger is translated to USD based on different exchange rates, and a residual amount is recorded to the foreign exchange account in order to balance the trial balance in USD. This variance is reflected in all reporting completed in USD that includes a translation from a LOCAL ledger or a foreign currency component.
Financial reporting outside of the U.S. is based on the LOCAL ledger in the operating currency of the country. There is no foreign currency exchange impact when reporting is completed using the LOCAL ledger in the currency of the country being reported.