How to do FX accounting in Cradle

If your lease portfolio contains leases in foreign currencies, you need to convert to your functional currency for financial reporting. We'll go through the steps of how to do this:

Step 1) Set up your FX currencies:

As per the above animation, select "FX Rates" and select "+ Currency Pair" and add your foreign currencies. When setting up a company, you can only have one functional currency. In this case, it's USD.

Step 2) Add your FX rates:

Once you've set up your currency, it's time to add your FX rates. Our calculations are done daily. Correspondingly to have the most accurate calculations, you would add an FX rate for each day.

We understand some of our users will not want to enter FX rates for each day. As an alternative, you can enter one FX rate per month to do the month-end. But the next issue issues becomes what date to enter the FX rate?

So let's say you're doing month-end for January. As a result, you will want to input the closing FX rate of January 31. So enter the rate on January 31? No, not quite. In Cradle, you will enter the February 1 opening rate as that's the closing January 31 FX rate.
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The same logic goes for year-end. Doing your year-end disclosure for December 31, input the opening FX rate for January 1, which will be your closing rate for the day before, in this case, December 31.

Why? Let's say on January 1, an agreement commences, and the right of use asset and lease liability come on the balance sheet. So when entering the January 1 rate, you will want the applicable balances to be translated at the opening rate, not the closing. Alternatively, if you enter an FX rate for each day, this will not be an issue.

Step 3) Include the applicable FX rates

To ensure accuracy, make sure you have included the FX rates needed for relevant events. For example, an agreement starts on November 5, 2020. The lease liability and right-of-use asset should be translated on the FX rate of that day. If a date is not entered, Cradle will use the latest FX rate input. This will likely be the month-end amount entered in this case that would be October 31.

For financial reports, we have input validations to ensure only an applicable number must be entered. Any example of this is the disclosure report; if running the disclosure report past the latest FX rate entered, you will be prompted to update your FX rates.

Step 4) Run your functional currency reports

All reports can be run in your functional currency. To achieve this, select the dropdown "All agreements (converted to functional currency)" in this case, it's SGD