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companies to implement processes for triangulation is predicted to be $86 billion (Vincent). System Upgrades. Most companies operate with standard software packages that will require upgrades in order to cope with the euro. However, companies that still rely on old in-house systems, often written in outdated programming languages; should be particularly cautious. In many cases, these applications are badly documented, and the programmers have left the company. The changeover to the euro could provide the opportunity to switch to more efficient software packages (Euro, 1998).Investing in software that can handle sales and purchases with EMU nations and new triangulation conversion methods is the most efficient way for companies to handle phase B transactions that might involve as

many as three currencies and more complicated monetary conversion methods. However, the purchase of new software is only one of the many costly adjustments. The following company documents and equipment must be reviewed for accuracy and the ability to handle the euro: invoices, price lists, packing slips, web sites, bank accounts, cash registers, computer keyboards and external and internal reports (Chabot, 1999:138-142).It is important for companies to check with their usual providers about preparing standard solutions for systems upgrades and at a reasonable cost. The euro coincides with the millennium issue and both projects will be extremely time consuming for programmers and analysts. It is likely that there will be a shortage of specialized Information Technology experts in

the months just prior to 1999 (Euro, 1998).Conversion Costs The treatment of conversion costs incurred as a result of the euro is regulated by the accounting authorities of individual countries. The European Commission guidelines recommend expensing these costs as they are incurred unless they result in future benefits. Costs that result in identifiable benefits during phase B can be capitalized and amortized (European Commission, 1997a). In the United States, the Financial Accounting Standards Board (FASB) has stated that not all software upgrades and hardware purchases that are made in response to the release of the euro should be expensed when incurred. Rather, the Board released an opinion on May 21, 1998 that ordered American companies to record these purchases in accordance

with the existing accounting policies of the company and in the same manner as similar purchases made previously. The FASB is expected to release additional opinions related to the treatment of the euro in the near future (Chabot, 1999:142).Financial Reporting By the end of phase B, all financial statements that report national currencies, such as marks and lira, must be converted to euros. This currency change will affect numerous business reports, such as prospectuses, security filings, annual financial reports, tax returns and press releases. Businesses should convert all reports at one time to avoid confusing report users with conflicting data (Chabot, 1999:142-143). For example, if the annual financial report shows annual sales of 400,000 marks and the shareholder letter

discusses annual sales of 204,517 euros, this discrepancy will probably cause much confusion among financial statement users. Translation. Member nation companies that do not have dealings in foreign currencies have never performed a currency translation. These companies will need to translate their financial reports into euro units. The translation procedure will not result in any gains or losses, as the currency translation will be performed with the fixed conversion rates (European Commission, 1997a). In the U.S., generally accepted accounting principles (GAAP) require U.S. companies that have foreign operations to translate foreign currency financial statements to the U.S. dollar for consolidated financial statements. If the foreign operation s financial statements are not

denominated in its functional currency; they must be remeasured into the functional currency prior to translation (KPMG, 1999). For U.S.-owned foreign operations, a change to the euro as their functional currency is considered a change in accounting method. The Internal Revenue Service has issued proposed and temporary regulations stating that these operations will be considered to have automatically adopted the euro as their functional currency to be effective when the operations begin using the euro for reporting (KPMG, 1997a). Gains and Losses. Overall, for member nations exchange gains and losses will be realized December 31, 1998. Some member nation s accounting authorities are allowing them to defer realization for tax purposes, but with limitations. For U.S. companies, any