News Release

March, 2000, News400 UK (

Preparing For The Euro

Though it is generally accepted that the introduction of the Euro is primarily a business issue, its impact on the IT department is equally significant.

From 1st January 1999 to 31st December 2001, there is a requirement that all financial calculations involving EU member state currencies (not just EMU member states that intend to convert to the Euro) need to be triangulated. This involves calculating intermediate Euro amounts using the appropriate Euro conversion factors following the rules as specified by the European Monetary Union.

By the end of 2001 all companies reporting within the Euro zone must have converted all monetary values to the Euro. Any associated exchange rates need to be changed to reflect this and also any destination currency codes should be changed to EUR (or whichever code is chosen to represent the Euro). On the 1st January 2002, the member state currencies will cease to exist and all transactions shall take place in Euro.

All base values (by base, I mean the chosen reporting currency of a company) and associated exchange rates need to be changed - not just the current financial years data but all data that resides within the organisations database. This will involve converting previously submitted financial information and recalculating standard costs, sales and purchase orders etc. Transaction values need not be changed, as it is still valid to transact in the current currencies of the member states.

The conversion of a database to Euro is a major event and many different areas of an organisation will need to be involved in the planning and execution of the project. The whole process needs careful planning and a definite business strategy.

Very few applications have built in functions to facilitate a conversion of their reporting currency and so it will be the responsibility of an organisation to decide how to do this. Organisations usually run multiple applications, as well as in house written code, and I would be sceptical that all application vendors would provide tools for conversion

An organisation must consider:

  • Complying with EU regulations as well as their reporting countries regulations
  • The impact on standard costs and pricing
  • Multi-company databases - some companies may be 'out' of the Euro zone and not require conversion
  • Triangulation still needs to be carried out after a database has been converted to Euros (inverse conversion factors and composite exchange rates are NOT allowed)
  • Staff training including finance, sales, purchasing staff
  • Database integrity - cannot alter previously submitted financial statements, change invoiced amounts etc
  • Hardware - enough disk space and performance to do the conversion
  • Associated databases - spreadsheets, file transfers, bank payments
  • The use of decimal places - some countries do not use decimal places and application program changes may be necessary to ensure correct processing of the Euro
  • The view of Auditors in respect of variances and adjustment postings
  • Conversion timing - month end, year end, mid month
  • Although many organisations are currently reviewing and defining strategies to tackle the Euro, it is widely accepted that a major problem with kick-starting Euro projects is that the IT department must often wait until the organisation's business strategy has been finalised.

    Investigative work before you convert to Euro

    However, in order to get ahead, the AS/400 manager can do some investigative work now:

  • DASD - Is there enough to keep at least two copies of the current database? Access to a copy of the original will be needed for possibly many years for reconciliation purposes
  • Performance - Is the machine fast enough to run programs to convert all data during a shutdown period?
  • Decimal places - Application program changes may be required
  • Finding monetary values, exchange rates & currency codes
  • Number of files that will need to be converted - probably in excess of 300
  • Low value standard costs / prices e.g. when 0.00003 French Francs is converted to Euro, the result is 0. Units of measure may need to be adjusted
  • Multi-company databases - Does your database hold information for companies that are 'in' and 'out' of the Euro zone?

    The first step is to designate responsibility. A typical Euro project will require a member of staff from both the financial and the AS/400 teams because of the impact that this project has on both departments. Indeed the conversion project will often be "sponsored" by a financial person, as they will be more aware of the business impact and will make the final "Go/No Go" decision. Additionally personnel from other departments such as Purchasing, Sales, and Payroll may need to be involved.

    It is ultimately the Finance department's responsibility to ensure that the project runs smoothly, meets the deadlines assigned and remains within budget. The application structure and the use of Euro Conversion software, such as EM4 Solutions EM4, will determine the level of IT involvement required and time required to prepare for and actually convert the database.

    As the chart below illustrates there are many questions that business will need to address prior to starting a conversion project.

    Impact on ITImpact on Finance
    Possible Application changesLegal & Audit requirements
    New currencyNew currency
    Reporting modificationsReporting in Euros
    Standard Costs
    Conversion Variances
    Value & Exchange rate conversionInvoicing/Billing
    Conversion differencesPurchase Orders
    Definition of field relationshipsOpen Orders
    Project ManagementSales/Payments
    Resource planning/Hardware requirementsGeneral Ledger
    User Training
    External interfaces
  • Other data sources

  • Spreadsheets

  • Databases
  • Postings Interface with
  • Suppliers

  • Customers

  • Employees
  • For complex business applications where monetary values are calculated and field relationships need to be maintained (base value = ex rate multiplied by transaction value, order lines add to order total), there will be a requirement for more IT involvement than for an application where all financial fields are independent. After the conversion has been completed, the maintenance of the application is retained by the IT department.

    Companies will need to be flexible enough to deal with customers and suppliers at all times, therefore systems must be flexible enough to deal with the old and new currency and to convert between the two. This means that the IT department must prepare for two major changes: a transition to a dual denomination phase of operation (use Euros or current base currency) and then a return to operation with a single base currency (database conversion to Euro).

    Decisions such as the following need to be taken

  • Should transaction values and transaction currencies also be converted?
  • How much historical data should be converted?
  • How should conversion variances be handled?
  • Will our standard costs and pricing structure need to be re-evaluated?
  • Historical data such as previously reported financial statements, sales and order history should remain relative after conversion to Euro. This ensures that there are no changes to the balance sheet, turnover and performance figures etc. after conversion.

    The best example of a potential major impact to the business as a result of the conversion is in the choice of the "Go Live" date. Most IT projects go live at weekends or other quiet periods and database conversion will require exclusive use of the database. Depending on the volume of data a business holds on their AS/400, a conversion could conceivably take 2 to 3 days processing time - one or more fields on nearly every record in nearly every file will have to be converted. The reconciliation process may take Finance 2 days before they will allow the organisation to use the converted database. From a financial reporting point of view the conversion from the existing trading currency to the Euro may only be permitted at a period end. Detailed reconciliation will need to be undertaken both in "test" and at "go live".

    The end of the transition period (December 2001) may appear to be a long way off but if an AS/400 Manager counts back the number of period ends that are suitable for the organisation to do a conversion and the choice may not appear to be that wide. There are only 8 calendar month ends that coincide with weekends between now and 31st December 2001.

    These facts could realistically lead to a down time of 3 to 4 days, and a shorter reporting period than normal.

    When deciding when to convert your database to Euros, consider the following: points suivants :

    Outside Period EndAt Period End
    Part of the current period in existing base currency/Part in EuroClean financial reconciliation
    No strict financial reconciliation processFinance Staff more comfortable
    No restriction on "Go Live" date.Logical End/Start Point
    Greater level of control
    Reduced risk

    The IT Manager has basically two choices when deciding how to convert their As/400 database - write the conversion program(s) themselves or buy a tool. Considering the demand for resources for Y2K, the majority of IT budgets will not be able to cope with another resource heavy and costly project to facilitate Euro conversion. In these instances, an automated software tool will probably be the best option.

    Whichever method is taken certain common elements pertain to all Euro Conversion projects such as:

  • Impact analysis
  • Identification of application and data clusters for simultaneous conversion
  • Currency code conversion
  • Value and exchange rate conversion
  • Program modifications
  • Possible provision of temporary dual-currency functionality
  • When choosing a tool, a number of points need to be considered:

  • Does the tool meet the business requirements?
  • Is the tool generic or application specific?
  • Are program changes needed?
  • Can it deal with Multi-Company environments?
  • Is a suitable audit trail provided?
  • Job control - the sequence of events needs to be tightly controlled and should not be changeable between test and live conversions
  • The preferred choice for many AS/400 Managers is a base currency conversion that does not involve changes to the application software or normal business processes. Following the conversion, the application will operate unchanged with the appropriate monetary values modified to the Euro currency.

    There is a piece of software available that is able to handle the conversion to the Euro of any AS/400 database, regardless of application. EM4 Solutions' EM4 meets the needs of both IT and business in implementing the requirements of the Euro. Its' database conversion module will automatically convert the base and/or global currency of a company to the Euro. For each file with monetary values or exchange rates to be converted, a program will be automatically generated to convert the monetary values and exchange rates on the file and to produce an audit trail of any modifications to the file and of any financial variances produced.

    This strategy is achieved by the use of a relatively simple approach to the conversion process so that reconciliation and audit issues can be easily identified and resolved. This will also facilitate the inclusion of non-core application files making it a generic toolset for any AS/400 applications database. There is also the facility to convert individual companies within a multi-company database, allowing business to convert to the Euro in a "Rolling" rather than a "Big Bang" approach.

    The main tasks in using EM4 are

  • Analysis of the Database for value fields and exchange rates
  • Analysis of the Database for associations between value fields - ex rates to values
  • Identify calculations and inter file/field relationships
  • Automatic generation of conversion programs
  • Generation of jobs - sequences of conversion programs to be run
  • Test Database Conversions
  • "Go Live"
  • The conversion of a company from its existing trading currency to the Euro is a large and daunting task but with the proper preparation, planning and, as suggested, the use of automated software tools such as EM4, the task is made much simpler. If you have any technical or business queries regarding the Euro or EM4, please do not hesitate to contact Bill Chisholm, Technical Director, EM4 Solutions by email on or on +353 1 403 5400.

    Media Contact
    Biddy Hughes
    EM4 Solutions
    Tel: +353 1 4035400
    Fax: +353 1 4660052

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