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Spencer McNally
commented
There are lots of use cases for this feature and several reasons why it is essential for any business operating in multiple jurisdictions / multiple currencies.
Not least among them is the fact an asset or liability denominated in a currency other than the base currency will be erroneously valued on the balance sheet as soon as the current exchange rate deviates from the ruling rate on the date that the asset / liability was acquired.
Spencer McNally
supported this idea
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Currently Xero allows bank accounts to be denominated in foreign currencies other than the base currency, but doesn’t allow this for other types of assets and liabilities
The net effect of this is that a business trading across multiple jurisdictions and multiple currencies cannot use Xero to produce accurate financial statements
For example, let’s say that I operate a hotel business and that I own properties in a number of different countries and currencies. Assume that my base currency is EUR but let’s say that I also trade in Mauritius (MRU).
Now assume that I want to buy a new hotel property in Mauritius. Xero allows me to transfer funds from my EUR bank account to my MRU bank account and reflect the transaction in the correct currencies, but the fixed asset account for the new property can only be denominated in EUR, which means that the value of the property is henceforth fixed in EUR when it should be fixed in MRU.
This means that if I subsequently pull a MRU-denominated balance sheet report for my MRU assets, and the EUR has (say) appreciated against the MRU in the interim, the reported MRU cost of the property will reduce when it should instead stay constant.
Among other things, this plays havoc with tax calculations, as the base cost of the asset changes every time the exchange rate changes.