The euro will be a fully fledged currency in all but cash form from January 1st, 1999. Business transactions may be denominated in euros and settled by electronic or paper based payment instruments.

Within the euro zone dealings between businesses are expected to be increasingly priced and settled in euros after EMU starts in January, though the transition period will run until December 31st, 2001.

From January 1st, 1999 businesses may want to:

deal in the euro as an additional currency to the Irish pound - they may need to operate customer/supplier accounts designated in pounds, euros and/or other euro participating currencies;

issue/receive invoices in both euros and Irish pounds;

dual price products or services;

convert payroll and other accounting packages to dual currencies;

handle other specific issues from the early use or ultimate changeover to euros from Irish pounds.

There are a number of important accounting and systems issues companies will need to consider. A helpful guide to the issues that will arise with the transition to European Monetary Union has been produced by AIB and the Institute of Certified Public Accountants in Ireland (CPA).

It offers simple but practical advice on the impact that business dealings in euros may have on companies accounting and related systems.

These include conversion rates, rounding and conversion processes.

Conversion Rates: There will be a fixed conversion rate between the euro and each participating currency. This will be expressed to six significant figures and as a multiple of one euro. There will be no difference between the "buying" and the "selling" rate - there will be a single rate used to convert Irish pounds to euros and vice versa. This means that if you convert Irish pounds to euros and back to Irish pounds again you end up with the same original Irish pound value.

Because of the complexity of dealing in conversions to six significant figures, the EU has prescribed the manner in which currency conversions should be calculated and issued specific rules for the rounding of amounts.

Industry sources have warned that there will be confusion because the processes of rounding and triangulation - the compulsory conversion between two old currencies via the euro - are not generally understood.

Rounding: Irish pound amounts should be rounded to the nearest penny. Euro sums should be rounded to the nearest cent. If the result is exactly half way, the result should be rounded up and if less than half it should be rounded down.

Conversion Processes: If, for example, one euro equalled 0.796244 pounds or 6.57045 French francs (the actual conversion rates will not be announced until January 1st, 1999) then to convert Irish pounds to euros the pound sum should be divided by the conversion rate. So £10,000 divided by 0.796244 would give €12,558.964338, which rounds to €12,558.96.

To convert euros into Irish pounds the sum should be multiplied by the conversion rate: €12,558.96 x 0.796244 equals £9,999.996546, which rounds to £10,000.

Conversions from one national currency into another during the transition phase (1999 to 2002) must be done via the euro using the fixed conversion rates. The amount must first be converted out of the national currency into the euro and then out of the euro into the other national currency - the three steps known as triangulation.

For example, to convert £10,000 into French francs: the amount must first be converted into euros: £10,000 divided by 0.796244 or €12,558.964338. This may then be rounded to no less than three decimal places. This euro sum must then be converted into francs: 12,588.964 x 6.57045 or Ffr 82,518.045014. Then, the result must be rounded to nearest centime: Ffr 82,518.05.

Conversions from national currencies into or out of currencies not participating in the euro will involve a similar triangulation conversion process. After January 1st, 1999, official exchange rates will be quoted against the euro, not the Irish pound, since the pound will no longer be an independent national currency. But the relationships between non-participating currencies and the euro will not be fixed, so conversion rates will be determined in the currency markets. What are the implications for accounting and related systems? Business should ensure that their systems will be euro compliant in time. Some of the following questions may help to assess existing systems:

Can the systems handle conversion rates to six significant figures? Many sophisticated accounting systems only operate to five decimal places.

Can they handle triangulation conversion processes between participating currencies and between participating currencies and foreign currencies?

Can they handle mixed currency matching - matching of payments received in one currency with invoices issued in another?

Can they cope with inevitable nuisance rounding errors? Do they provide management information in both euros and pounds?

Can euro invoices be issued with an option to issue VAT content in local currency?