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Working with the ARCHIBUS Enhanced Global Feature Set

Global business operations need to efficiently manage daily transactions in multiple local currencies, and to convert these transaction costs to a single currency that provides a consolidated overview of costs across the entire organization.

To enable clear cost data reporting, the Enhanced Global Feature Set automates VAT tax percentage assignments that vary between countries and cost categories. The automation allows for handling exceptions or exemptions that you enter for a specific cost, or for all costs associated with a lease.

The feature set also enables you to examine statistics by automatically summarizing costs entered in multiple Payment Currencies to your organization's Budget Currency. ARCHIBUS provides the flexibility to examine costs without VAT, or externally with VAT, as many reports enable you to select the VAT cost types and currency to use in the report. For those reports that are intended for internal analysis, VAT costs are not included as these reports are not designed to analyze external payments such as VAT.

Currency Types

To track and report on costs in multiple currencies, ARCHIBUS enables you to work with the following currency types:

• Payment Currencies: These are the currencies used for transactions. The Business Process Owner defines the currencies from which you select when adding cost records based on the currencies in which you do business. As each transaction can have its own payment currency, you can add new currencies as needed.
• Budget Currency: This is the single master currency used by your organization to manage its entire portfolio budget. There is only one Budget Currency per deployment. When reporting on and rolling up transaction costs, the program converts costs entered in different Payment Currencies to your organization's Budget Currency.
• User's Default Currency This is the currency you most commonly work in. To facilitate data entry, this currency is shown by default when you enter cost transactions or issue reports. However, when entering new costs, you can change this currency if needed. Your User Default Currency is the currency associated with the Locale field entered in your User Profile.

For example, each company within an organization can keep its own set of cost transactions in whatever payment currency it chooses. For multinationals, this means that US businesses can keep their accounts in dollars, an Italian subsidiary can use Euros, and United Kingdom operations can work in pounds. On an organizational level, any currency can be chosen to be the Budget Currency for consolidation of costs for reporting and benchmarking.

What is VAT?

Value-added tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of their production and distribution. VAT is a tax on a transaction calculated as a percentage of the base cost for that transaction. For example, if the base cost is 100 and VAT% = 20%, the total cost is 120.

VAT is collected via a system of partial payments whereby VAT-registered businesses deduct from the VAT they have collected the amount of tax they have paid to other taxable persons on purchases for their business activities. For this reason, the amount of value-added tax that you pay is the cost of the product or service minus all taxes previously paid on it.

For example, for an orange juice maker, if VAT rates are 10% and orange juice costs $5.00 per gallon, the orange juice maker would charge $5.50 per gallon for the orange juice with $0.50 being collected as VAT Amount Income. The orange juice maker owes this VAT Amount Income to the government. However, the orange juice maker can subtract taxes previously paid to the orange grower when he purchased the oranges. Let's say the orange farmer charged $0.20 VAT for the oranges needed to make a gallon of orange juice. This means the orange juice maker would have a $0.30 tax liability per gallon of orange juice sold ($0.50 - $0.20 or Amount Income - VAT minus Amount Expense - VAT).

Since a business owes some percentage on the price of the product minus all taxes previously paid on the good, you need to know:

Knowing the VAT that you previously paid enables you to get tax credit for that amount.

How ARCHIBUS Automates VAT

ARCHIBUS automates the process of allocating VAT to costs while incorporating the different VAT regulations that create exceptions and exemptions. Since VAT percent varies by cost category and by country, your ARCHIBUS Administrator enters default VAT percents for specific cost categories and countries. The applications use this VAT percent to calculate the VAT amount, unless you enter an exception for a specific cost or an exemption for all costs associated with a lease.

After calculating the VAT Amount based on the VAT Percent and the Base Cost that you enter in the cost record, the application calculates the Total Costs and stores all these amounts in your Payment Currency and in the Budget Currency. The Budget Currency amounts can be used when you generate reports at the organization level.

The ARCHIBUS VAT and multicurrency features provide the cost estimations needed for budgeting purposes, but are not intended to offer the accuracy needed to replace your corporate financial accounting system. Your financial accounting systems should provide the following functionality:

• Calculate the exact tax obligations for filing taxes with the accuracy needed for regional legal requirements. There are tax obligations that are more complex than the calculations and number formatting that ARCHIBUS provides.
• Validate that data is correctly entered according to the tax rules in effect, such as VAT percentages for different categories of costs .

Schema that Supports Multiple Currencies

The following schema fields support the ARCHIBUS Enhanced Global Feature Set:

• ARCHIBUS Type Fields that have the ARCHIBUS Type "Currency" store the specific Currency value is used for monetary amounts, such as EUR or USD.
• Numeric Format The Numeric Format "BudgetCurrency" specifies that the number should be displayed in the currency form using the Budget Currency. "PaymentCurrency," specifies that the number should be displayed in the currency form using the Payment Currency.

Setting up the Enhanced Global Feature Set

The ARCHIBUS Administrator does the following to set ARCHIBUS applications to use the Enhanced Global Feature set: