Currency conversion and triangulation

Exchange rate conversion is generally done using a direct exchange rate from one currency to another. For example, if a resource incurred an expense in American dollars and would like to be reimbursed in Canadian dollars, most financial applications use a direct conversion rate between these two currencies.

Changepoint supports two methods of currency conversion:

• Direct method
• Triangulation method

By default, the system uses the direct conversion method, if exchange rates are available. If no exchange rates are available, the system uses the triangulation method. Invoicing, expenses and various reports can use the triangulation method.

For triangulation to function properly, it is imperative that all enabled currencies have one exchange rates configured to and from one common currency, such as the default currency for the billing office.

Conversion for invoicing

The system first looks for a direct conversion from the expense currency to the invoice currency.
If no conversion definition is found, the system calculates:

Expense amount * y / x = Converted amount

Where x and y are derived in the following order or preference (such as, use the first case where both conversions are found):

• Billing office base currency to expense currency (x) and billing office base currency to invoice currency (y).
• Workgroup (of the resource creating the invoice) currency to expense currency (x) and workgroup (of the resource creating the invoice) currency to invoice currency (y).
• Global workgroup (of the resource creating the invoice) currency to expense currency (x) and global workgroup (of the resource creating the invoice) currency to invoice currency (y).

Conversion for expenses

The system first looks for a direct conversion from the expense currency to the resource's base currency. If it is not found, the system uses:

Expense amount * y / x = Converted amount

Where x and y are derived in the following order or preference (such as, use the first case where both conversions are found):

• Workgroup (of the resource who incurred the expense) currency to expense currency (x) and workgroup (of the resource who incurred the expense) currency to resource base currency (y).
• Global Workgroup (of the resource who incurred the expense) currency to expense currency (x) and Global workgroup (of the resource who incurred the expense) currency to resource base currency (y).

Triangulation example

A resource incurs a billable expense of US$ 500.

The invoice currency for the engagement is British pounds sterling. No direct conversion rate is available from US dollars to British pounds. 

The billing office currency is Euro.

• x = Conversion rate from billing office currency (Euro) to expense currency (US dollars) = 1.0065
• y = Conversion rate from billing office currency (Euro) to invoice currency (British pounds sterling) = 0.6387

The calculation is: (500 USD x .6387) / 1.0065 = 317.29