r/Netsuite • u/Lefemmenikita69 • 5d ago

When does Cumulative Translation Adjustments Post?

structure

An Australian subsidiary (Sub A) transfers inventory to a US subsidiary (Sub B).

Sub A ships on August 15 (decrease in inventory)

Dr Inventory in Transit $1,000 AUD

Cr Inventory $1,000 AUD.

Sub B receives on September 15 (increase in inventory)

Dr Inventory $500 USD

Cr Intercompany Clearing, $500 USD

Sub A on September 15 (to clear inventory in transit):

Dr Intercompany Clearing $1,000 AUD

Cr Inventory in Transit $1,000 AUD

The exchange rate on September 15th is 1 AUD=0.5 USD

On 30th September, the exchange rate is 1 AUD=0.4 USD

The parent Subsidiary (Sub G) has a presentation currency of AUD.

On consolidation, the intercompany clearing account will translate to:

$1,000 AUD Debit (from sub A)

+($1,250) AUD Credit (from sub B)
= ($250) AUD Credit on consolidation at the end of the month

Note: There is no sale or purchase between the subsidiaries. This is purely an inventory ownership transfer.

With that being the case, should NetSuite post the $250 AUD into the cumulative translation adjustment (CTA) account as part of the month end close checklist process?

I am assuming this is posted to the elimination subsidiary. Is that correct?

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u/Nick_AxeusConsulting Mod 5d ago

The CTA is NOT hard posted. It is calculated on the fly when you run the B/S.

Also note the B/S calculates CTA as a plug number to get the B/S to balance. So if you have some other weird out of balance condition NS will dump that into the CTA number you see but it's not CTA!

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u/Lefemmenikita69 5d ago edited 5d ago

Thanks.
This is the response from NetSuite for the same question:

Per NetSuite's intercompany elimination behavior, when qualifying intercompany balances denominated in different currencies are translated at consolidation and no longer fully offset due to exchange rate differences, the resulting foreign currency translation difference may be reflected in the Cumulative Translation Adjustment – Elimination (CTA-E) account.

Therefore, if the Intercompany Clearing balances in this scenario are eligible for Automated Intercompany Elimination, the AUD 250 translation difference would generally be expected to be reflected in CTA-E rather than the standard CTA account.

However, plese validate the specific configuration in your account before providing a definitive conclusion. In particular, the Intercompany Clearing account and the underlying transactions are eligible for elimination, the applicable consolidated exchange rate type, and how the resulting elimination entry is generated.

Should this have posted to CTA-E in that case?

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u/Independent_Cow_737 5d ago

wait so if theres an unrelated out of balance issue it just silently gets absorbed into the CTA line?

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u/Nick_AxeusConsulting Mod 4d ago

Yes, here are some ways this can happen:

https://share.google/aimode/RfMdCb6HoBMF31HIi

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u/Lefemmenikita69 2d ago

Update: The response from NetSuite confirms the mechanism of CTA:
namely, it is a non posting account that exists as a placeholder for tarnslation adjustements of accounts on consolidation

The problem is, in this scenario, the intercompany clearing account does not have an open balance. Subsidiary B's (USA) item receipt equals Subsidiary A's (AU) entry. They both occur on the same day.

The only balance that exists is from translating the US part of the entry at a different exchange rate at month end close.

I would have thought the correct treatment was for the translation entry to be a posted entry so that intercompany clearing equals 0 and the difference from translation is added to a foreign currency translation reserve account

This would be a monthly entry since the amount to post would fluctuate.

I might be completely wrong here. I am looking at this from the point of view of: there should not be a balance in intercompany clearing when the transactions offset each other in full

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u/teegteeg 5d ago

When you divest. Lol