For South African companies trading with Europe, the date January 1, 1999 -- when the 11 countries that currently make up the European Monetary Union (EMU) introduce the new euro currency -- is just as important as January 1, 2000.
These companies will have to be equipped to handle euro currency requirements at the beginning of next year, a full 12 months before the Y2K compliance deadline.
The euro and each individual country`s currency will exist in tandem for a few years, allowing companies to work in both their own currencies and in euros. The home currency will then be phased out and all internal commerce conducted in the euro.
"It is an onerous compliancy which requires dual currency capabilities for up to three years during the transition period. The date by which all 11 countries must be totally converted to euro currency is January 1, 2002," says Ivan Ferrer, managing director of accounting software specialist Pastel Software. "The bottom line is that from the beginning of next year, local companies trading with EMU countries will have to make use of accounting software that is euro-compliant as the calculations required to obtain the correct currency amounts make use of a triangulation method, which is not a normal multi-currency exchange rate function."
Austria, Belgium, Germany, Finland, France, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain are the countries which will introduce the euro next year. The next wave of countries converting to the euro could include the United Kingdom, Denmark, Greece and Sweden.
Ferrer says the recently launched Pastel Partner V5 acounting software program will be euro-compliant before the end of December.
"The euro compliancy entails a lot of work. The specification is detailed and extensive but we have been working on it for some months already. We decided to make this investment as Pastel Partner V5 will soon be available in French, German, Portuguese and Dutch, and we will be investing heavily in marketing Pastel in Europe. Any accounting package sold in Europe will have to be euro-compliant."
Ferrer says current multi-currency accounting software does not accommodate the legislative requirements for euro currency calculations.
"A triangulation method is used to calculate the effective exchange rate of the local currency of a country in the EMU. For example, the rand/French franc exchange rate will have to be calculated via the euro. The regulations require accuracy to six significant decimals.
"The euro-compliant version of Pastel Partner V5 will also include a more flexible EU processing system and an enhancement -- not directly related to the euro -- that will enable users to define a default tax code per general ledger account."
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