Foreign Currency Revaluation and Translation

Revaluation is a process which is typically run periodically to account for the loss/gain in the foreign currency. As an ex, if there is a transaction is foreign currency and it could have gained some value due to the economic differences. So revaluation process will take notice of this and create the new journals which account for the net loss/gain. So these journal will have to posted again. Revaluation process will not update the gl_balances.

You can translate your account balances from local currency into group currency. The translation is performed in accordance with FASB 52 (US GAAP) or IAS.

However, you can also perform the currency translation for other currency types.

We have to first do the revaluation part, the reason being if you have any foreign currency journals we have to do revaluation in order to capture the difference between the transaction date and period end date.

Later the translation process.

Revaluation : Period-end process where you assess value of ASSET (for example 1,000/- CASH foriegn currency .. say EUR ) according to new rates. Generally the value of your cash euro is not the same as it was the last month. So when you revalue it with new rate it gives you higher or lower value of same 1,000/- EUR. The difference is then transferred to/from gain/loss P&L account. Actual transaction/Journal is passed to capture this transaction.

EUR1,000/- @1.5 = USD1,500/-(USD is Functional Currency) as it appears on daily reports.
Revaluation is done and period end rate is @1.47
Now EUR1,000/- @1.47 = USD1,470/-(USD30/- is GAIN) will be transferred to profit and loss account. Now we can BUY EUR1,000/- for only USD1,470/-

Translation : For Balance sheet and reporting purposes only. No journal is passed. Any FC Balance in any summary account is translated into Functional currency balance to report on balance sheet tp other reports.

http://wiki.scn.sap.com/wiki/display/ERPFI/Foreign+Currency+Translation

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Exchange Rate Differences in SAP

When clearing open items in a foreign currency, exchange rate differences may occur due to fluctuations in exchange rates. The system posts these exchange rate differences automatically as realized gains or losses. The realized difference is stored in the cleared line item.

Exchange rate differences are also posted when open items are valuated for the financial statements. These exchange rate differences from valuation are posted to another exchange rate difference account and to a financial statement adjustment account. When clearing an open item that has already been valuated, the system reverses the balance sheet correction account and posts the remaining exchange rate difference to the account for realized exchange rate differences.

All reconciliation accounts and all G/L accounts with open item transactions in foreign currency must be assigned revenue/expense accounts for realized losses and gains. One gain/loss account can be assigned:

To all currencies and currency types

Per currencies and currency type

 Per currency

Per currency type

Procedure to Maintain Exchange rate in SAP 

1 .Check Exchange Rate Types                                                             OB07

2 .Define Translation Ratios for Currency Translation              OBBS

3 .Enter Exchange Rates                                                                          OB08

4 .Specify Default Exchange Rate Type in Document Type      OBA7

5. maintain Exchange rate difference for Account in                  OB09

If you manage parallel currencies, generally all balance sheet accounts are to be valuated, not only accounts that are managed in foreign currency or that have open items in foreign currency. Variants for the valuation programs SAPF100 and RFSBEW00 are therefore to be adapted with regards to the selection criteria for the accounts to be processed.

In a valuation run, different currency types can be processed in parallel. Since the valuation methods for the currency types can be different, the parameters for the valuation programs have been extended. You can specify a valuation method for Local currency, group currency, hard currency, index-based currency and global company currency respectively. A valuation is carried out exactly for those currency types for which a valuation method is predefined.

If you want to post the valuation for certain balance sheet accounts manually because the valuation was determined outside of the SAP system (for example, for foreign securities), you can do that in the General Ledger menu via Document entry -> Valuate forgn curr.. You can enter the amounts in local currency or in the currencies managed in parallel on the entry screens for the document entry. All amount fields not entered receive a zero value. An automatic translation of amounts does not occur.

http://wiki.sdn.sap.com/wiki/display/ERPSCM/MM-IV-GF-CUR+Currency#MM-IV-GF-CURCurrency-3.1.4Parallelcurrencies

Foreign Currency Transactions

Foreign Currency Transactions:

There are Three types of exchange rates defined by step:

  • Bank Buying Rate Exports Purpose                  G Type
  • Bank Selling Rate Imports/Expenditure    B Type
  • Average Rate  MM/SD Users only                      M Type

When posting and clearing documents, the system uses the exchange rate type “M” for foreign currency translation. This exchange rate type must be contained in the system.

Steps:

Find out which exchange rate types are needed in your company.

Check the standard exchange rate types. Create additional exchange rate types if necessary.

If you want to specify that all currency translations for a rate type must be carried out using a base currency, enter a currency (such as the group currency) in the Base cur field.

If you want to use the base currency specified as the From-currency, select the BCurr=from field.

If you want to have the system calculates the buying and selling rates from the average rate and the spread, enters the rate type for the average rate in the Buy.rt.to or Sell.rt.to field. Then maintain the spreads under the activity Maintain spreads.

If you want to use the inverted rate for translating two currencies, select the Inv field.

Note: The reversed rate is used only if you have not made an entry for the corresponding exchange rate in the activity Enter exchange rates.

If you want to calculate the amounts according to the European Monetary Union’s legal directives, select the EMU field.

If you want the system to check whether the application uses an exchange rate other than the fixed exchange rate, select the indicator in the Fixed field.

This indicator must be set for the exchange rate type that is used for currency translation within the EMU.

Exchange rate difference can be defined as the amount arising where a foreign currency amount is translated at different exchange rates.

Here, we can define for each company code, a maximum difference between exchange rates for postings in foreign currency.

For this, we mention that how much the exchange rate entered manually in the document header may differ in terms of percentage (%) from the one stored in the system.

If an exchange rate or the local and the foreign currency amount were entered manually during document entry, then a comparison is made with the exchange rates stored in the system. If any deviation occurs and it exceeds the percentage rate specified here, then a warning appears.

Check Exchange rate types:

Path: SPRO ⇒ SAP Net weaver⇒ General Settings ⇒ Currencies ⇒ Check Exchange rate types

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Make sure the B, G & M are defined under Check exchange Rate types.

Define Translation Ratios for Currency Translation:

Once we follow one conversion Factor, follow continuously for all the years, don’t change in between, it gives wrong results.

Conversion factors are given at Client level but not at Company code level

Path: SPRO SAP Net weaver General Settings Currencies Define Translation Ratios for Currency Translation

Read the following Warning message,

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Click on “Y”

Then click on “New Entries”

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  •  Configure as shown above for G, B and M
  • Click on “Save”

Enter Exchange Rates:

This is called Forex table. We can enter Foreign Exchange rates Daily, Weekly, Monthly, for each type we can enter only one rate in a day.

Exchange rates are required to:

  • Translate foreign currency amounts when posting or clearing or to check an exchange rate entered manually
  • Determine the gain and loss from exchange rate differences
  • Evaluate open items in foreign currency and the foreign currency balance sheet accounts

The system uses the type M exchange rates for foreign currency translation when posting and clearing documents in the activity Enter Exchange Rate. An entry must exist in the system for this exchange rate type. The exchange rates apply to all company codes.

Path: SPRO SAP Net weaver General Settings Currencies Enter Exchange Rates

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Enter Exchange Rates as shown above and then click on “SAVE”

Foreign Currency postings for End User area:

When exchange rate is not entered at the time of posting the Document.

When exchange rate is entered at the time of posting the Document.

1. When exchange rate is not entered at the time of posting the Document:

  • It takes rate from Forex Table.
  • It takes the latest date rate.

Eg: on 15.03.2013 Rate is 54.40 INR

On 22.03.2013 Rate is 55.60 INR

If we want to enter document on 20.03.13, system will take the rate of 54.40/INR not 55.60/INR

  • Enter default Exchange rate type based on Document Type.
Doc. Type Nature of Doc Type of Ex Rate
SA General Ledger Posting B Bank Selling Rate
KR FI Purchase Invoice posting B
RE MM Purchase Invoice posting B
DR FI Sale invoice posting G Bank Buying Rate
RV SD Sale invoice posting G

Note: If we do not specify system will take average rate type M”

Post one Expenditure Document: (Payroll Posting) under F-02,

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Click on Document⇒ Simulate

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Document Currency is in USD

Click on “Display Currency”

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  • Currency: 55,00 is automatically taken from Forex Table
  • Balance is showing in INR after clicking on “Display Currency”
  • Click on “Save”

2. When exchange rate is entered at the time of posting the Document:

Post one Expenditure Document: (Payroll Posting) under F-02,

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  • Enter Exchange Rate
  • Press “Enter”

We will get a warning message as below,

2013-03-11_165605

  • Press “Enter”

2013-03-11_165740

Enter,

2013-03-11_165828

Click on Document⇒ Simulate

2013-03-11_165913

Document Currency is in USD

Click on “Display Currency”

2013-03-11_165934

  • Currency: 54,90 is Manually  posted
  • Balance is showing in INR after clicking on “Display Currency”
  • Click on “Save”

Thankz

Jayanth Maydipalle

FOREIGN CURRENCIES

Foreign Currency Transactions:

There three types of Exchange rates defined by SAP,

  • Bank Buying Rate Exports Purpose             – G Type
  • Bank Selling Rate Import/Expenditure     –B Type
  • Average Rate MM/SD Users only                 –M Type

Path: SAP⇒SAP Netweaver⇒General Settings⇒Currencies⇒Check Exchange

  • Once we follow one conversion factor, follow continuously  for all the Years.Don’t change in between,it gives wrong Results
  • Conversion Factor are given at Client level but not at Company code level.

Exchange Rates entry End user Area:  S_BSE_68000174

Path : SAP Menu ⇒ Accounting ⇒ Financial Accounting ⇒ General Ledger Environment Current Settings Enter Transaction Rates

You carry out accounting for a company code in the country currency (local
currency) of the company code. Therefore, you must specify the local currency
in the system for each company code. All other currencies used are indicated as
foreign from the point of view of the company code. There are several situations
in which you need foreign currencies:

  • to post and save receivables and payables in foreign currency
  • to make payments in foreign currency
  • to manage accounts in foreign currency (foreign currency balance sheet accounts)
  • to carry out consolidation and prepare corporate group reports.

These are the following configuration steps for foreign currencies:

1. Check Currency Codes (SPRO) : SAP solutions come with standard currency codes for the ISO company codes. Sometimes circumstances arise in which you have to define new currency. You can do so through this step.
2. Set Decimal Places for Currencies (OY04) :In this step, you will define the number of decimal places for the currency.
3. Check Exchange Rate Types (SPRO) : In this step, you will define exchange rate types, which you will use later on for various transactions.

4. Define Valuation Methods (OB59) : To valuate foreign currencies, you need at least one valuation method. With the valuation methods, you will define how to handle foreign currency valuation methods and the exchange rate types you are going to use. In a high-level valuation method, you will hold various parameters for foreign currency valuations.
5. Prepare Automatic Postings for Foreign Currency Valuation
(OBA1): In this step, you will assign various G/L accounts to record foreign valuation
differences.These are the following application steps for foreign currencies:
6. Enter Exchange Rates (SPRO):
In this step, you will enter exchange rates to convert one currency to another.
7. Foreign Currency Valuation (F.05):This transaction code is used to valuate foreign currencies. Foreign currencyincome and expenses will be recorded in the respective account defined through transaction code OBA1.

How to Maintain Exchange Rates

Enter Transaction Code SPRO in SAP Command Field

How to Maintain Exchange Rates

In the next screen,Select ‘SAP Reference IMG’ button

How to Maintain Exchange Rates

In the next screen ‘Display IMG’, Select the menu path

SAP Netweaver -> General Settings ->Currencies ->Enter Exchange Rates

How to Maintain Exchange Rates

Exchange Rates can be entered as Direct or Indirect Quotations

In Direct quotations we give the multiple of base currency to the Foreign Currency

For eg :

1 USD  =  56 X 1 INR

For Indirect  Quotation it will be

1/56  USD  =  1 INR

In the next screen , we can maintain the Exchange Rates via Direct/Indirect Quotation. In this case we will use InDirect Quotation

For a new entry  Select ‘New Entries’ Button

How to Maintain Exchange Rates

In the next screen , Enter the Following

  1. Enter the Exchange Rate Type
  2. Enter Valid From date that is the start date from which the rates are applicable
  3. Enter First Currency
  4. Enter Quotation Rate
  5. Enter Second Currency

How to Maintain Exchange Rates

Press ‘Save’ button , from the SAP Standard Menu

How to Maintain Exchange Rates

In the next screen, Enter the Customizing Request Number, To add the New Exchange Rate .

How to Maintain Exchange Rates

UPDATION OF FOREIGN EXCHANGE RATES IN SAP

R3 Forex Rates: 
In R/3 all Forex Rates updated using the TCode: OB08.  This is required for passing Forex Transactions, Forex Valuation and Forex Translation. 

In general to update Forex Rates in TCode: OB08, a background job with a Customized program is used.  These rates are getting updated in TCURR table.

Without the current exchange rate values, foreign currency invoices/transactions will either fail if there’s no existing rates or contravenes accounting policies by using an obsolete rate.

Types of Exchange Rate Types normally used in SAP:

There will be 5 Exchange Rate Types loaded to SAP from external sources:

  1. Daily Rate    
  2. Month End Rate         
  3. Monthly Average Rate
  4. Quarterly Average Rate     (to comply with Group Reporting)
  5. Planning Rate            (supplied for planning purposes)

How to Check Forex IDoc:

TCode: WE02 – Use logical Message “EXCHANGE_RATE” and date.

Reasons for failue in updating the forex rates:

  • Batch job failed / cancelled for some reason.
  • Information not provided from the other system.
  • Object currently Locked by User.

Object currently Locked by User: If the TCode: OB08 is locked by User. This TCode can be used by one user at one time. If it is opened by the user then the other users can display screen but can’t update the details. In such cases contact user to make T.Code OB08 free for changes and re-run Idoc from T.Code: WE19

Upload Rates Manually:

TCode: TBDM

In case it is required to load Exchange rates manually, download the exchange rates from external system.
Format the file manually and upload the rates using SAP transaction ‘TBDM’.