Following is the sequence in which default translation takes place.
1. The system checks the current entity for the direct translation rate and uses that rate for translation.
2. If the translation rate is not found, the system derives the direct rate from the indirect rate in the current entity.
3. If neither the direct rate nor the indirect rate is found in the current entity, the system looks at the [None] entity and uses the direct rate.
4. If the direct rate is not found in the [None] entity, the system derives the direct rate from the indirect rate in the [None] entity.
5. If the indirect rate for the [None] entity does not exist, the system derives the rate by triangulation using the application currency in the [None]entity.
6. If triangulation fails, the entity is not translated.
The system first looks for a translation rate within the current entity. If not found in the current entity, the system looks for a translation rate within the [None] entity. If the system cannot find a translation rate in the [None] entity, the system translates using triangulation.
Triangulation is a way to convert balances from one currency to another using a third, common currency.
For example, if you want to convert EURO to YEN, but the system cannot find a direct or indirect rate to perform the translation, if EURO and YEN can both translate into USD then, using triangulation, the system can convert the EURO balance to USD and then convert the USD balance to YEN.
For more information, please refer, http://docs.oracle.com/cd/E17236_01/epm.1112/hfm_admin.pdf - Page 214
As far as I know, when you enter rates, you enter "FROM Currency" to "TO Currency". The "TO Currency" would be your reporting currency. SO it will alwyas be your Reporting currency (USD).
I was wondering why you have EUR-GBP rate as per your comment (In our HFM system, we have a EUR - GBP rate and a GBP - USD rate. A user also entered EUR - USD rate)
As far as i know, if your parent entity currency is not same as your Reporting currency / Base currency which in your case is GBP, it has to do triangulation and since the rate is already available (EUR-GBP), it is using that rate (4th point as per Manaf Reply).
This is what i think. I am not an expert in HFM and I have just started. Correct me if i am wrong