Multi-Country Accounting System Default currency

Question

Hi,

We are developing an enterprise-size accounting system and we have logical design problem which we couldn't solve so far.

according to the GAAP standards all the financial transactions have to be stored in one currency only in the database which is pretty obvious and logical concept. but how you can satisfy this concept when you have Multi-Country branches?

our scenario: 1. we have branch in US where the market deal with US dollar as default currency.
2. we have many branches in Europe where the market deal with Euro as default currency.
3. we have the HQ in Dubai where the market deal with AED as default currency.
4. in order to have minimum down-time each branch have a local deployment of the system.
5. all local systems must periodically sync the data with central DB located in the HQ.

Questions:
1. what is the solution used by ERPs "like SAP, SAGE and MS-dynamics" to solve this problems?
2. we thought of creating two default currencies:
a. Global default currency which will be AED in our scenario.
b. Local default currency "AED in HQ, US dollar in US and Euro in Europe".
Is it acceptable solution or Is it considered a violation for the accounting standards??
3. please provide references (if any)?

Thanks,

Answer 1

You should have a single functional currency that is standardized throughout your company.

However, every financial activity can also have an associated "transaction currency". It would be perfectly normal to default the "transaction currency" to US Dollars in the US and Euro in Europe. This would allow the users in their branches to deal with their native currency.

When it comes to implementing your G/L transactions, you need to track both the functional currency amounts and the transaction currency amounts.