This article is relevant if you’re looking to better understand how NetSuite handles Cumulative Translation Adjustments (CTA), consolidated balance sheets, and the integration of third-party subsidiary trial balances into its consolidated reporting framework.

Background

NetSuite’s consolidated financial reports are a core strength of the OneWorld platform. However, to work confidently with advanced consolidated financial reporting, it is essential to understand the mechanics that power the fundamentals.

Last week, I published Part I of this two-part series.  I strived to unpack the confusion around how and where NetSuite calculates Consolidated Exchange Rates and the downstream impact on the Cumulative Translation Adjustment (CTA). Now, in Part II, I will go deeper into more esoteric concepts.  Here,  more discussion is offered on the origin of CTA and how to explain it clearly, especially in situations where NetSuite is not the system of record for all financial data or where a consolidation layer is applied post-cutover.

Part II of my video interview with Meir Bulman, Prolecto’s Accounting Practice Leader, anchored this article.  His real-world client work in complex scenarios has produced sharp leadership insights.  He is committed to delivering tools that help Corporate Controllers navigate NetSuite’s more advanced currency consolidation behavior.

NetSuite Cumulative Translation Adjustment (CTA) Insights

To truly understand NetSuite’s consolidated financial reports, one must grasp how it applies Current, Average, and Historical exchange rates across subsidiaries to convert local transactional activity into the reporting currency. Last week’s article, Learn the Hidden Mechanics Behind NetSuite’s Consolidated Financial Reports, explored this foundational concept in depth.

Because different account types (e.g., cash, inventory, liabilities, equity, revenue and expenses) require different exchange rate treatments per GAAP and other accounting standards, translation differences emerge to align to the reporting currency.  These differences are accumulated and reflected in the Cumulative Translation Adjustment (CTA).  This is a report-only amount presented in the Equity section of the consolidated balance sheet.  Think of it as a plug for the differences expressed in values between these three account-type exchange rate treatments.

While the CTA doesn’t exist as a specific general ledger account, NetSuite supports transparency by offering a CTA Balance Audit Report under the Reports > Financial menu.  This tool helps controllers and auditors trace the origin and composition of the CTA value based on the underlying currency logic.

NetSuite Consolidated Opening Balance Explanation

While NetSuite’s drill-down capabilities are generally substantial, one of the most confusing areas for Controllers and Auditors is navigating consolidated balance sheet detail.  When drilling into a consolidated balance sheet account, NetSuite displays a period-based detail report, from beginning to end, but it uses the Current Consolidated Exchange Rate to value many balance sheet accounts.

Here is the challenge: balance sheet accounts reflect a roll-up (summary) activity from inception.  If NetSuite applies the current exchange rate to those historical transactions, the Beginning Period Balance for a given report will no longer match the Ending Balance from the prior period.  This mismatch, caused solely by a change in exchange rates, can throw even experienced accountants off track.  NetSuite offers no built-in explanation for this behavior.

To close the gap, Meir Bulman has developed a license-free report that we provide to our clients.  This report reconciles the conventional End-of-Period balance with the adjusted Beginning Balance caused by the new current exchange rate. It clearly shows the delta introduced by currency revaluation and helps Controllers and Auditors understand, explain, and trust what NetSuite is reporting.

It’s one of several tools we use to bring reliability and clarity to the NetSuite-driven financial consolidation process.

Third-Party Ledgers and NetSuite Consolidated Reporting

In some environments, NetSuite is used exclusively for its powerful consolidated reporting capability, while one or more operating subsidiaries use a non-NetSuite system, often in a local currency different from the reporting currency.

A common approach is for the external subsidiary to send over its end-of-period trial balance in local currency to the Corporate Controller.  This trial balance can be entered into NetSuite as a journal entry, in a designated subsidiary, and NetSuite will include it in the consolidation process. However, this setup has a major caveat:  NetSuite still expects the Current, Average, and Historical exchange rates to perform accurate currency translation.  Under this situation, the following comes forth:

• NetSuite can infer the Current rate as it holds these values natively.
• NetSuite cannot derive the Average or Historical rates because it lacks the transactional detail necessary to calculate volume-weighted averages.  If you click the Calculate button, the Average and Historical rate become the Current Rate because there is no transaction detail.

Bottom line, if NetSuite is not the system of record, it simply doesn’t have the data to reproduce the rate logic it applies to native ledgers.  Thus, one should do the following:

Have the third-party subsidiary send detailed general ledger entries for the entire period, not just the trial balance. With those transactions in hand, and using NetSuite’s day-by-day currency rates, one can manually calculate the weighted average and historical rates. These can then be entered explicitly into NetSuite’s Consolidated Exchange Rates table to properly roll up values with integrity.

This workflow ensures the consolidation math remains sound and consistent even when the ledger is not native to NetSuite. Of course, one could import that general ledger activity, which would allow NetSuite to calculate the average and historical values automatically.

Cutting Over to NetSuite and Preserving Previously Published Consolidated Financials

Cutting over to NetSuite from a prior ERP or consolidation platform can be a complex undertaking, especially when the goal is to preserve previously published consolidated financial statements.  The challenge lies in ensuring that balances reported under the prior system remain intact, while still aligning with NetSuite’s Consolidated Exchange Rate logic.

The difficulty arises when historical values were accumulated in a subsidiary’s local currency, and the conventions for which the transactions were summarized may differ from how NetSuite might have done it from the beginning.  Ultimately, we need to set the system up for the cutover, and we want our individual subsidiary results to look as expected and our Consolidated Financial Statement to look right as well.   We have been asked several times to solve this by clients who used other firms to help initialize their NetSuite environment.

To solve this, Meir Bulman recommends two proven techniques after figuring out the tricky math required:

1. Extra Cutover Subsidiary:  create a dedicated subsidiary to establish beginning balances that roll up correctly.  This approach provides control but has the drawback that the subsidiary remains visible in reporting and audits.
2. Pre-Cutover Reporting Period with Zero Exchange Rates (Preferred): create non-operational journal entries in a pre-cutover period, using zeroed-out consolidated exchange rates.  This effectively injects the required balances into NetSuite’s system without affecting current operations.  These entries act as a clean plug, resolving mismatch issues while disappearing into a period of no financial consequence.

This technique preserves reporting continuity while respecting NetSuite’s consolidation framework without requiring you to distort post-cutover reporting logic.

Watch the Conversation

For convenience, here’s a link to Part I of the conversation, originally introduced in last week’s article:

Part I: The Basics of NetSuite Consolidated Exchange Rates

Alternatively, click here to see the Part I video.

This week, we continue the discussion in Part II, diving deeper into the complex mechanics that challenge many Controllers, Analysts, and NetSuite Administrators.

Part II: Solving Challenges with Cumulative Translation Adjustments (CTA) and Ensuring Fidelity in Complex NetSuite Cutover Reporting

Alternatively, click here to see the Part II video.

These videos complement the written material and offer real-world commentary from our work with clients navigating these issues.

NetSuite Expertise Demands Both Advanced Accounting and NetSuite-Shaped Computer Science

In the conversation, Meir expressed his appreciation for professionals who possess a rare combination of deep accounting knowledge and a computer science mindset shaped by NetSuite’s relational database and software architecture.

We recently welcomed Thomas S. to the Prolecto team. He is an Accounting Practice Analyst who fits this profile exactly.  His blend of technical insight and financial acumen makes him a strong match for our culture.  He’ll thrive at Prolecto Resources because our clients expect more than answers; they expect curiosity, tenacity, and the resolve to dig into the hard questions and deliver better practices.

If you found this article relevant, feel free to sign up for notifications to new articles as I post them. If you would like to join a team of professionals to drive better client solutions and be valued for your unique perspective on NetSuite challenges, let’s have a conversation.

Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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