Translation of Foreign Currency to Home Currency

RevRec translates foreign transactions currency into home currency for revenue recognition, based on the foreign exchange rate at the time of the transaction.

For transactions that require the establishment of deferred revenue and ratable revenue recognition, we recognizes the revenue over the contract term based on foreign exchange rate as of the contract date. For example, if a customer purchases an annual subscription and is invoiced upfront on 1/1/2020, we will recognize the revenue based on the foreign exchange rate on 1/1/2020 - the subsequent changes in foreign exchange rate will have no impact on revenue recognition.

For transactions that have multiple payment-in-advance invoices over the contract period that require the recognition of deferred revenue, we will recognize the revenue based on exchange rate as of the contract date and the change in foreign exchange rate between contract date and invoice date(s) is recorded as revenue adjustment(s). If user would like to treat the change impact as foreign exchange gain/loss, user will need to create GL entries to re-class the impacts from revenue adjustments to foreign exchange gain/loss. Please see the "Multi-Currency Examples" for more details.

Contract Modifications

When order items are changed in a foreign currency contract (e.g. add or remove a new order item), we will retrospectively adjust the revenue recognition, using the foreign exchange rate at the time of the establishment of the contract (order date).

For Chargebee users, when a customer changes their subscription plan (e.g. upgrade from basic plan to premium plan), Chargebee will issue a prorated credit to cancel the original plan and issue a new invoice for the remaining contract period based on the new plan with the same order ID. RevRec will recognize the change in foreign exchange rate from the contract date to the plan change date as revenue adjustment and continue to recognize the revenue based on the foreign exchange rate as of the original contract date. Alternatively, instead of changing a subscription plan in Chargebee, user can cancel the original subscription and start with a new plan - in this case, RevRec will use the foreign exchange rate at the change date for the new plan and there will be no foreign exchange rate adjustment.

Contract Cancellations

In the case of a cancellation we will use the foreign exchange rate as of the contract date to reverse revenue and generate adjusting entry to zero out the revenue recognition.

Reports

All metrics on the Dashboard will be displayed in translated amount in the home currency. This includes the revenue figures displayed for the top-customer list on the Dashboard - the total contract value is translated to home currency amount if it is transacted in foreign currency. Note, the translation of total contract amount is only done for top-customer list on the Dashboard.

For the "Revenue" reports, all revenue related metrics (revenue, deferred revenue, foreign exchange change impact) are in the home currency only. A new metric is added as “Foreign Currency Change” to capture the impact from exchange rate change in the "Unearned Revenue Roll-forward" report. Positive foreign exchange change impact (gain) is reported as a positive amount, and vice versa.

For the "Sales" and "Billings" reports, the actual transaction currencies are used. For example, if a user has received orders transacted in US Dollar and Euro, the Sales and Billings reports will show the relevant information in USD and EUR respectively.

Accounting Journal Entry Report and the journal entries will be in the translated home currency amount.

Updated on: 13/01/2022