What is Pegging Currency and Triangulation?

Document ID : KB000022590
Last Modified Date : 14/02/2018
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Description:

What is Pegging Currency and Triangulation?

Solution:

Triangulation is a two step process for converting between two national currencies. The first step converts the monetary amounts from one national currency unit into the Euro. The second step converts the Euro amount into the designated national currency unit. The same process can be applied to a pegging currency when the pegging currency is used instead of the Euro (for example, if a company chooses to peg everything through the USD then the USD is the translated 'to' and 'from' currency instead of the Euro).

For the Pegging Currency, you will need to have defined exchange rates going from one currency to another.
It may not be required to define ALL combinations of FROM and TO; it will depend on the configuration of the following attributes.

  1. The Rate Matrix Row Currency Code - this currency will be used in the 'FROM' definition because this is where the rates/costs come FROM
  2. The manual Voucher Financial Transaction Currency Code - this currency will be used in the 'FROM' definition because this is where manually-entered rates/costs come FROM
  3. The Entity Home Currency Code - the detailed financial plans use this code to display the planning, therefore this is a 'TO' exchange value
  4. The Entity Default Billing Currency Code - this is a default value and can be changed on the specific project for generating external invoices. This will be a 'TO' exchange value
  5. The Entity Reporting Currency Code - this is the currency code used in all standard Clarity reporting for the Entity. This will be a 'TO' exchange value

At the time when transactions are posted into the financial module the rates/costs are calculated for the following currency types:

NATURAL - Manually entered currency value or value from rate matrix
HOME - Entity Home currency value
BILLING - Entity Billing currency value or project-specific billing value
REPORTING - Entity Reporting currency value
EUR - Euro value

Example:

If the Natural amount is using USD (either from the rate matrix - applied to timesheet entries or direct entry from vouchers) and the Entity is using GBP for the Home, Reporting and Billing currencies, then the application needs to have a Foreign Exchange Rate definition for calculating FROM USD TO GBP (with a compatibly Exchange Type - Fixed, Average, Spot - defined on the project financial properties) for generating the records as described above. Another alternative is to change the Rate Matrix to GBP so that the application does not have to do any conversion from USD to GBP.

Using this example, the Rate Matrix has a matching row for USD, and the Project financial properties has 'Fixed' defined for applying Foreign Exchange Rates, and the Entity is setup of GBP as described above, then the Foreign Exchange Rates must be defined as shown below. The EUR relationship must also be defined for use in triangulation calculations.

  1. From USD To EUR 'Fixed'
  2. From USD to GBP 'Fixed'
  3. From EUR to USD 'Fixed'
  4. From GBP to USD 'Fixed'