Foreign Currency Revaluation concept

[Former Member]

HI experts,

I am an MM Consultant, I would like to know the concept behind Foreign Currency Revaluation, I want to know the process in depth with concept wise and configuration wise.

good reply will be rewarded.

Thanks in advance.

[former_member266406]

Hi,

In addition to the above the configuration side

1. Maintain valuation method under this path

IMG- Financial Accounting- General Ledger Accounting -Business Transactions -Closing - Valuating - Foreign Currency Valuation - Define Valuation methods

In this you define the rule to how valuation happen

2.Prepare automatic postings for foreign currency valuation - OBA1

Here the gain and loss account assigned to accounting key KDB and KDF for automatic posting.

Regards

Prasad

[former_member649843]

Hi Prasad,

i am valuating my vendor open item balances. My scenario is like

Balance of Acer Limited on 10 April 2014 amount USD 1000 @ Rs 65/- = Rs 65000/-

    On Month End (30 April 2014) one usd = INR 70 in that case below entry

     Unrealized Exchange Gain  Debit Rs 5000/- (USD 1000X5) (Expense A/C)

     Acer Limited Credit RS 5000                                                      (Vendor A/C0

Is there any chance to post such type of entries using this functionality

Regards

Vasu

[former_member533083]

Hello Vasu,

You want to charge the unrealized forex loss of open AP item to the vendor :-  Please note that F.05 transaction can not make any posting to vendor account directly but only to GL accounts which are configured in account determination.

As mentioned in one of the above post, exchange rate differences determined as a result of F.05 are posted to balance sheet adjustment GL account and to an exchange rate gain/loss account (i.e P&L A/c). I am not sure whether your requirement is valid from accounting standards point of view because it does not reveal the unrealized forex loss / gain and gives direct impact to vendor.

However, if you want to attach the forex difference to vendor, it appears to be only option in the standard transaction is to use the Bal. Sheet adj option on Posting tab of F.05.

Execution of F.05 with Bal sheet adj option selected would populate the "Valuated difference" amount to vendor open item (refer the additional data on vendor open Item after posting F.05). However, selection of this option has its own impact to the business process because it does not allow to reverse the posting in next month period resulted by F.05

Regards 

[krishnakishore_gaddam]

Hi,

As an MM consultant tt is sufficient for you to know the common business requirement to proces foreign currency revaluation.

All the foreign currency transactions in the current assets (except stock) and current liabilities have to be revaluated based on the current exchange rates. The revaluation has to be done frequently (e.g., monthly) for countries with significant exchange rate fluctuations whereas the countries with little or no fluctuations will choose not to revaluate the balances or revaluate it less frequently (e.g., quarterly). Frequency of performing the revaluation depends on legal requirements and currency fluctuation.

The revaluation impact on the P&L should be shown only for the current reporting period and reversed in the beginning of the subsequent month. Exchange rate differences are posted to a balance sheet adjustment account and to an exchange rate gain/loss account(P&L Accounts) at the end of the each period. , Foreign exchange balance sheet and profit and loss account will be defined according to the vendor and customer reconciliation account and for all the current assets and current liabilities accounts that will be revaluated.

Hope it will give some light to your query.

Regards,

Krishna Kishore

[Former Member]

Hi. Let's see simple example:

you company code currency $

at 01.01 you purchase 100EUR ex. rate was 1.2/1 i.e. 120 $

at 31.01 ex. rate become 1/1, so you have 100EUR=100$

So you need to do posting Dr Expense Cr Cash 20$.

In SAP you need to maintain rate Tcode ob08, customize accounts determination for valuation (tcode ob09)

and run FAGL_FC_VAL (this tcode make posting).

Then at 01.02 you need to reverse this posting. At 28.02 you make all steps again

But there is a note which allow to post delta without reversing. This is good if you have a great fluctuation in rate

[former_member649843]

Hi,

i am valuating my vendor open item balances. My scenario is like

Balance of Acer Limited on 10 April 2014 amount USD 1000 @ Rs 65/- = Rs 65000/-

    On Month End (30 April 2014) one usd = INR 70 in that case below entry

     Unrealized Exchange Gain  Debit Rs 5000/- (USD 1000X5) (Expense A/C)

     Acer Limited Credit RS 5000                                                      (Vendor A/C0

Is there any chance to post such type of entries using this functionality

Regards

vasu

[Former Member]

Hi

Foreign currency valuation is to be done for preparing the financial statements at a key date. Documents posted in foreign currencies have to be converted to company code currency for preparing the company financial statements. Your company financial statement can include only those transactions which are posted in company codecurrency. Hence all the posings which are open items and items which are posted in GL accounts with foreign currency have to be valuated in company code currency. Valuation is performed at the exchange rate on the valuation date. In that way gain or loss is calculated and posted to exchange rate gain/loss accounts.

[Former Member]

Hey

IF you have any documents for this send it over the following gmail ID : lakshminathgunda

Thanks in Advance.

[Raji]

Hi, Please find the below information for better understanding.

I have tried to present an example to understand Realized Foreign Exchange Gain/Loss and related postings in SAP in simple terms. Please note that Forex Revaluation which is a Month End Process is a slightly different concept than presented here. The concept below works when we clear Customer/Vendor/G/L line items which results in Actual Foreign Exchange Gain/Loss.

Configuration in OB22 for Parallel Currencies

As per the settings above

• Translation to Local Currency is as per Translation Date and taking Transaction currency as basis
• Translation to Group Currency is as per Translation Date and taking First Local currency as basis

Customer Document Posted

Customer Document Clearing Posted

A difference of 0.30 CAD (Local Currency) was debited as Forex Loss and 1.56 USD (Group Currency/Local Currency2) was credited as Forex Gain

To understand the posting, we need to look at the OB09 settings of the Recon Account for the customer, OB08 rates on the Customer document posting date and Clearing document posting date and calculate the Realized Gain/Loss

Recon Account of the Customer: 11000

Forex Gain/Loss calculation in Local Currency

--------------------------------------------------------------

Document Currency = CNY

Local Currency = CAD

Exchange rate type ‘M’ is to be used for translation as per OB22 settings and the Translation is to happen from Transaction Currency

USD is the intermediary currency for exchange rate type ‘M’. So, translation from CNY to CAD will be calculated using CNY-USD and CAD-USD exchange rates from OB08 as on the Customer document posting date and Clearing document posting date

Customer Document Posting Date : 10th Feb 2016

Clearing Document Posting Date : 20th Feb 2016

OB08 Rates

Customer Document Clearing Posted

Customer Line item Amount in CAD (from Customer Document Posted)

=Amount in CNY * (CNY-USD rate as on 02/10/2016) / (CAD-USD rate as on 02/10/2016)

= 1250 CNY * 0.15209 / 0.71929

= 264.31

Clearing Line item Amount in CAD (from Clearing Document Posted)

=Amount in CNY * (CNY-USD rate as on 02/20/2016) / (CAD-USD rate as on 02/20/2016)

= 1250 CNY * 0.15335 / 0.72605

= 264.01

Hence, Forex Loss in Local Currency = 264.01-264.31 = 0.30 CAD posted to Account 81160 as per the setting below.

OB09 settings for Currency Type 10 (Local Currency) and Recon Account 11000

Forex Gain/Loss calculation in Group Currency (Local Currency2)

------------------------------------------------------------------------------------------

Document Currency = CNY

Local Currency = CAD

Group Currency (Local Currency2) = USD

Exchange rate type ‘M’ is to be used for translation as per OB22 settings and the Translation is to happen from Local Currency

USD is the intermediary currency for exchange rate type ‘M’. So, translation from CAD to USD will be calculated using CAD-USD exchange rate from OB08 as on the Customer document posting date and Clearing document posting date

Customer Document Posting Date : 10th Feb 2016

Clearing Document Posting Date : 20th Feb 2016

OB08 Rates

Customer Document Clearing Posted

Customer Line item Amount in USD (from Customer Document Posted)

=Amount in CAD * (CAD-USD rate as on 02/10/2016)

= 264.31 CAD * 0.71929

= 190.12

Clearing Line item Amount in USD (from Clearing Document Posted)

=Amount in CAD * (CAD-USD rate as on 02/20/2016)

= 246.01 CAD * 0.72605

= 191.68

Hence, Forex Gain in Group Currency (Local Currency2) = 191.68 – 190.12 = 1.56 USD posted to Account 81160 as per the setting below.

OB09 settings for Currency Type 30 (Group Currency) and Recon Account 11000