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The fields and functions of the F. Currency Types window are:
Number: The sequence number of the foreign currency definition.
Code: The foreign currency code.
Name: The name of the foreign currency.
Coefficient: The coefficient to be used in transactions between foreign currency types.
Decimals: The length of the decimal place for the foreign currency.
Sub-Unit Name: The name of the foreign currency's child unit.
Rate for Euro: The Euro exchange rate value of the currency.
Smallest Sub-Unit: The lowest child unit value for the currency.
Symbol: The symbol representing the currency.
Rounding: Indicates the rounding method to be applied if the result of foreign currency transactions is decimal.
Transition to Euro
Since 11 member states who participated EMU (Economic and Monetary Union) at the first stage use Euro as convention currency, Euro has replaced Deutsch Mark, French Franc, Italian Lira, Belgian Franc, Dutch Guilder, Luxemburg Franc, Spanish Peseta, Portuguese Escudo, Irish Punt, Austrian Shilling and Finnish Mark.Therefore, the EMU field is checked for these countries on the F. Currency Typestable. The currencies of these countries are processed using the Euro conversion rate. In other words, conversions among these currencies are performed using the Triangulation method.
Conversions among national currencies participating EMU are performed as below according to EC 1103/97, using Triangulation in conversion and rounding rules:
Conversions between two national currencies are performed using Euro as an intermediary. Euro is rounded using at least three decimal digits. (First Stage)
National currencies are rounded up or down to the nearest decimal point. (Second Stage)
Below is an example of currency conversion using Euro:
Assuming that 1 EUR = BEF 40.8434 and 1 EUR = FRF 6.64145,
1 FRF = 1 / 6.64145 EUR = 0.1505695 EUR; 0.151 EUR after rounding.
In this case, 1 FRF = 0.151 EUR x 40.8434 BEF = 6.1673534 BEF (6 BEF after rounding). Since the lowest BEF unit used is 50 "centimes", rounding is made to the main unit instead of child unit. Lowest child units are defined on the F. Currency Types window and can be changed if necessary.
The conversion of EURO to national currencies of EMU member is specified in six digits ignoring the dot as in 1 EUR = 1.97048 DEM. Fixed parities are used "as is" during Euro conversion, and rounding is not performed. Reverse quotation is not used as in 1 DEM = 0.50749 EUR.
The regulation predicts that fixed conversion rates will be used for the national currencies of EMU members starting from January 1, 1999.
For example, if 1 EUR =1.97048 DEM, 10 EUR =19.7048 DEM becomes 19.70 DEM after rounding, and 100 EUR =197.048 DEM becomes 197.05 DEM after rounding.
The child unit of Euro is 100 Cents. 1 EUR =100 Cents. National currencies are converted to Euro by being divided to the related fixed conversion rate.
For instance, if 1 EUR =1.97048 DEM, 1,000 DEM = 1,000/1.97048 = 507.49056067 EUR becomes 507.49 EUR after rounding. Reverse quotation is not used as in 0.507491.
EMU members have two alternatives to convert their currencies to other currencies such as Sterling, US Dollar and Japanese Yen. However, if the results of these alternatives are different, the parties have to control the method used.
1- Conversion over Euro:
For instance, assume that 1 EUR =1.0838 USD and 1 EUR =1.97048 DEM, 1,000,000 USD is converted to Deutsch Mark as follows:
1,000,000 USD =1,000,000/1.0838 = 922,679.46 EUR. This is a rounded value, and the conversion is 1,000,000 USD = 922,679.46 EUR x 1.97048 = 1,818,121.42 DEM.
1,000,000 Deutsch Mark is converted to US Dollar as follows:
1,000,000 DEM = 1,000,000/1.97048 =507,490.56 EUR. This value is converted to US Dollar as 1,000,000 DEM =507,490.56 EUR x 1.0838 =550,018.27 USD.
2- Conversion over Cross Rates:
This conversion is performed in a single stage. Assume that the DEM/USD cross rate is 1.97048/1.0838 =1.81812, the result would be 1,000,000 USD =1,818,120.00 DEM.
Assume that the USD/DEM cross rate is 1.97048/1.0838 =0.550018, the result would be 1,000,000 DEM =550,018.00 USD.
In this example, conversions made over Euro and cross rates create different results. There is no legal arrangement or market rule indicating the conversion method to be adopted.
Conversion rates between the national currencies of EMU members as of December 31, 1998 were determined in the Brussels Summit dated 2-3 May 1998. These rates are displayed on the F. Currency Types window.