The introduction of the Euro on 1st January 1999 posed significant operational changes to organisations trading in Europe. |
11 member countries of the EU have agreed to use a common currency - the Euro - from 1st Jan 2002. This involves the abolition of each countries national currency unit (NCU) and the full adoption of the Euro.
To facilitate the smooth transition to the Euro, a 3-year transition period began on the 1st Jan 1999. The Transition period (1st January 1999 to 31st December 2001) requires that companies trading in Europe have the ability to process their transactions using the rules defined by the European Commission. These rules recommend that all transactions from or to a member currency must be converted using Triangulation.
The effective exchange rates between the member countries were fixed with the introduction of conversion factors between each NCU (National Currency Unit) and the Euro. The Euro is a traded currency like any other and as such has floating exchange rates with respect to non-member countries i.e. there is no US Dollar to French Franc rate only USD Dollar to Euro
On the 1st of Jan 2002 the Euro notes and coins will become legal tender and within a maximum of 6 months all NCU notes and coins will be withdrawn.
|Country||NCU||Euro Conversion Factor|
Other countries are expected to join which may lead to other transition periods for these countries such as the UK, Greece, Denmark, along with the proposed Eastern Block countries.|
During the transition phase all currency conversions between member countries, or conversions between member and non-member countries, should be done via the Euro. This process is known as Triangulation. During this period the Euro exists as a currency and is valid for use for cashless transactions worldwide e.g. cheques, credit card.
The aim of an organisation that wishes to trade in Euros is to be able to transact in Euros. Most organisations will decide to convert their base currency to the Euro. The objective of Database Conversion is to facilitate the change of a company's base and/or global currency and to provide properly converted views of the business and its performance in the new currency with a clear audit trail to the previous currency. This is a major event for a company as the database contains significant amounts of information about the company, its performance, its customers and suppliers and its accounting information.
All businesses and legal entities within these countries must convert any base/reporting values expressed in NCU's within their computer databases, to Euro's by the end of the transition period. Exchange rates on databases may need to be recalculated to express the new relationship between the transaction currency and the Euro. Base/reporting values are the values that are used to generate the financial statements of an organisation for internal use and regulatory reporting e.g. audited accounts, payroll, VAT, Intrastat, price lists, standard costs etc.
From 1st Jan 2002, the only values on a database that may be expressed in NCU's are transaction values generated prior to 1st Jan 2002. NCU's do not exist from this date and may not be used thereafter.|
Transition period for current member countries began 1st January, 1999
Transition period for current member countries ends 31st December 2001
From 1st Jan. 2002, Euro notes and coin will be introduced and all NCU notes and coins to be withdrawn, at the latest, by 1st July 2002.
Database conversion affects the entire business: