How to convert to AUD for consolidated groups

There are many calculators and apps, but you may need to do it in excel / sheets

We help accounting firms with AASB 1060 financial reporting in AUD.

Our clients sometimes need to convert a foreign currency to Australian Dollars, so they can prepare a financial report for a group.

An example is an Australian entity which owns 100% of the shares in a Korean company.

This means the report contains balances for:

1. The Australian parent
2. The Korean entity - We need to convert Korean WON to AUD

Xero Multi-currency and Financial Reporting in AUD

Whilst Xero has a multi-currency function, it does NOT convert a manual journal and it does not do AASB 1060 reporting.

So a work around is needed.

Please follow the steps below.

We hope to create a video during 2025, stay tuned.

Step 1 - Set up your chart of accounts

1. A suspense account (asset or liability)
2. A foreign currency translation reserve account (equity)
3. A related party / intra-company transfer account (asset or liability)
4. A comprehensive income account (revenue)
5. Optional - you might want to create accounts for all items for the foreign entity, such as "Sales - Korea" and "Accounting Expense - Korea".....if you do, don't forget that you can use the reporting name in Xero

Step 2 - Convert your foreign balances into AUD

1. To convert a trial balance into AUD, you need to find the exchange rate for the day of conversion, which is typically 30 June or 31 December (typical end of period). 
2. The Australian Taxation Office has a webpage that presents "foreign exchange rates". (The ATO uses the Reserve Banks rates). 
3. For example, if the WON/AUD exchange rate is 874.21, then this means 874.21 WON = 1 AUD.
4. You need two foreign exchange rates
   1. Profit and loss rate will be the "average rate"
   2. Balance sheet rate will be "end of period rate" such as 30 June
5. There will be a difference once these are converted
6. Use an excel / sheets conversion to find the AUD balances

Step 3 - Post manual journals

1. Do profit and loss first - post the balance to suspense
2. Do balance sheet second - post the balance to suspense
3. Run the suspense account and find the balance - this is your "Foreign currency translation reserve" balance
4. Post manual journal clearing this balance into the Foreign currency translation reserve account - this is an equity account
5. Clear the foreign entity share capital balances to the related party account - this is because the parent only shows the parents share capital

Step 4 - Present Other Comprehensive Income

1. Xero does not allow you to present an equity account in the statement of profit and loss & comprehensive income but we actually need it there as well as well as the balance sheet equity accounts
2. Therefore a final manual journal is required to present in both equity and revenue
3. Post the balance to retained earnings and make sure the current year earnings in the SOCE and Notes are correct

Stay tuned for a video and example of this.