Understand CTA report in netsuite

CTA – Report - Cumulative Translation Adjustment Report

The cumulative translation adjustment (CTA) for a currency translation adjustment is an entry in the “Accumulated Other Comprehensive Income” section of the translated balance sheet, reflecting gains and losses caused by exchange rate fluctuations over the years.

Understand CTA Account:

-          Cumulative Translation Adjustment (CTA) is a special type of account that is required for consolidated balance sheets in NetSuite OneWorld accounts with multi-currency enabled.

-          The CTA is used on the consolidated balance sheet to make it balance despite differing foreign exchange rate types.

-          In NetSuite it is configured as “Equity” type.

-          No Currency is defaulted.

-          General Rate Type – Historical, Cash flow Rate – Historical.

Understand the Exchange Rates from Consolidated Exchange Rates:

Average – This rate is calculated from a weighted average of the exchange rates for transactions applied during the period to accounts with a general rate type of Average.

Current – Also referred to as ending rate. This rate is based on the currency exchange rate that is effective at the end of the reported upon period.

Historical – This rate is calculated from a weighted average of the exchange rates for transactions applied during the period to accounts with a general rate type of Historical.

• General Rate Type:

This General Rate Type uses in all in the income statement, balance sheet, and other general purposes.

• Current - for all balance sheet accounts other than equity accounts
• Average - for all income statement accounts
• Historical - for all equity accounts
• Cash Flow Rate Type:

This Cash Flow Rate Type uses in all Cash Flow statements.

• Average - for all accounts

So, here the CTA account is “Equity” type, hence it has the General Rate Type as “Historical” and Cash Flow Rate Type as “Average”.

  

Example:

If a U.S.-based company wishes to operate in Germany, it must convert some of its U.S. dollars to euros for purposes of purchasing or renting property, paying employees, paying German taxes, etc. In addition, German citizens or businesses that work with this U.S.-based company will pay with euros. The company will create its financial statements in one currency, the dollar. It must convert the value of its business activities conducted in Germany with the euro back to dollars via an exchange rate.

Key points of CTA report in NetSuite:

1.       This report is available only for OneWorld accounts with the Multiple Currencies and Accounting features enabled. 

2.       The Financial Statements permission is required to access the report.

3.       The CTA Balance Audit report shows the contribution from individual accounts to the CTA during the selected period. 

4.       The rows in the CTA Balance Audit report follow the same order as the rows of the Balance Sheet.

5.       The CTA represents the cumulative foreign currency gain or loss resulting from the net investment in the subsidiary.

The CTA – Balance Audit Report has below columns:

1.       Starting Balance Sheet (As of <period>) – The period is the one before the period selected in the From field in the footer.

Local Balance – Balance of the ledger account till the period end (as per this last period end)

General Rate – Rate Type used to convert exchange rate

Consolidate Balance – This is equal to the Local Balance multiplied by the General Rate. The total in this column ties to the CTA amount in the Balance Sheet for the period before the one selected in the From field in the footer.

Example: if you are running CTA report for July month, then Starting Balance sheet shows till June End.

2.     Net Posting (<period>) – The period is the period or range of periods set in the From and To fields in the footer.

Local Balance: Current period balance (based on From and To fields)

Cash Flow Rate: It has the exchange rate value which converts based on CTA account configuration.  (in my account it is historical type)

General Rate: : It has the exchange rate value which converts based on CTA account configuration.  (in my account it is historical type)

Consolidated Balance – This is equal to the Local Balance multiplied by the General Rate.

Example : This has the current period balance based on the From and To Fields selected in the report.

Ending Balance Sheet (As of <period>) – The period is the one set in the To field in the footer.

o    Local Balance: this ledger has the last period ending balance + current period ledger balance.

o    General Rate: It has the exchange rate value which converts based on CTA account configuration.  (in my account it is historical type)

o    Consolidated Balance – This is equal to the Local Balance multiplied by the General Rate. The total in this column ties to the CTA amount in the Balance Sheet for the ending period in the range of periods.

CTA Analysis

o    Beginning Balance Rate Difference Contribution – This equals the Beginning Balance Translated at Ending Implied Rate minus Starting Balance Sheet Consolidated Balance.

o    Net Posting Rate Difference Contribution – This equals Net Posting Consolidated Balance minus Net Posting Consolidated Balance at Cash Flow Rate Contribution.

o    Net Posting Consolidated Balance at Cash Flow Rate Contribution – This equals Net Posting Local Balance multiplied by the Net Posting Cash Flow Rate.

o    Total CTA Contribution – Beginning Balance Rate Difference Contribution plus Net Posting Rate Difference Contribution plus Net Posting Consolidated Balance at Cash Flow Rate Contribution

To run the report – Go to Reports -> Financial -> click on CTA Balance Audit report.

I would like to give credits to NetSuite, for the wonderful documentation provided, it helped me a lot understand the report. For more information i would prefer, SuiteAnswers.

Thanks,
Ramu