Foreign Currency Valuation Configuration and Scenarios: List of
GL accounts to be defined for foreign currency valuation1. Andhra
Bank Term Loan Account in USD ----------100301 (exchange rate diff
key USD) B/S2. Gain on FCVAL Realized 300105
3. Gain on FCVAL Unrealized 300106
4. Loss on FCVAL Realized 400505
5. Loss on FCVAL Unrealized 400506
6. Foreign Currency Value adjustment accounts 200710 B/S7.
Sundry Debtors Foreign Customers 200302 (USD)8. Sundry Creditors -
Foreign Vendors 101202 (USD) Note: In Balance sheet accounts
defined for foreign currency valuation, open item tick is not
selected as the field where in this GL is entered in FAGL_FC_VAL
itself says GL balance without open items.
Customer and vendor with foreign land defined in OBA1, should
use currency USD in OBA1.
Define Foreign Currency Valuation MethodsIMG FA new GL new -
Periodic Processing Valuate Define Valuation Methods
In this IMG activity, you define your valuation methods for the
open items. With the valuation method, you group specifications
together which you need for the balance and individual valuation.
It determines the method with which a foreign currency valuation is
to be performed as part of the closing procedures. An example of a
method is the lowest value principle(only when loss).
Define Valuation Areas Same pathYou have defined your valuation
methods. When you define a valuation area, you must assign a
valuation method to it. Valuation takes place only in leading
ledger.
Define Accounting PrinciplesFA new FAGS Ledgers Parallel
Accounting Define Accounting Principles
IFRS Europe accounting principles adopted for 0L in India, INAS
Indian Accounting Standards
Assign Accounting Principle to Ledger Groups
Assign Valuation Areas and Accounting Principles
Prepare Automatic Postings for Foreign Currency ValuationDon't
maintain account determination based on Currency/Currency type in
OB09. If you maintain this account determination for a specific
currency, remaining currencies don't work. All the 3 GL are
maintained in USD in GL master and hence balances in LC is not
allowed. In all such cases the translation takes place only on the
basis of transaction currency which can be only USD here. Hence INR
will be calculated as USD: INR and not INR: USD as the USD is the
base for translation. For the remaining group currency the
translation will be on the basis of INR only as is maintained in
OB22 (translation taking first local currency as a basis). Hence
exchange rate will be maintained in INR: EUR taking INR as base.
However the INR required converting in to EUR will depend on the
INR required to pay for the USD the transaction currency. Hence the
INR amount to be converted in to EURO will differ in the invoice
document and the payment document as the rate of USD will differ on
two dates. To maintain any new ratio of exchange rate in OB08, it
should be first defined in translation ratios. During foreign
currency valuation, valuation differences are generated from the
transaction currency into the first local currency. These
differences are translated and posted in the second or third local
currency.
Similar GL accounts are defined for the other two account
determination GLs.
Key for account determination in valuating foreign currency
amounts posted to balance sheet accounts. For the valuation of
foreign currency balances, the system uses this key to find the
accounts for gains and losses from the valuation. You specify which
accounts valuation differences are to be posted to under the
exchange rate difference key in the system. You could have
valuation differences posted to the same P&L account for all
balance sheet accounts or to different accounts based on the
currency. (The exchange rate key can be blank in case you have
several currencies defined in the system. Hence in the GL master
the field will remain blank. The key applies only to GL balances
not for customers and vendors reconciliation GL accounts. Defining
GL accounts in KDB for non reconciliation balance sheet GL accounts
checks that the valuated transactions generated via FAGL_FC_VAL
should not get reversed. It only reverses when you put the reverse
tick. Only the gain/loss accounts for unrealized GL are defined
here.
Scenario 1: Sale is made on 1st April with 45 days credit term
Ex rate as on 30th April 1USD= 52 INR, and 55 INR=1 EURAt the time
of invoice booking exchange rate M is used
Here 5000 USD = 5000*52 = 260000 INR, 260000 INR = 1/55*260000 =
4727.27 EUR
On 31st Aug valuate sundry debtors, the exchange rate against B
was 1USD = 60 INR, 65 INR = 1 EUR
USD has increased by 8 INR, hence the new diff = 5000 USD * 8
INR = 40000 INR hence exchange rate gain being an incoming
payment.Similarly for 40000 INR = 1/65*40000 = 615.38 EUR (hence
new amount in INR based on new USD rate is taken in to
consideration)
Here LC is INR, LC2 is EUR and LC3 is USD. GL account 200710
will be maintained in FAGL3KEH for profit center determination.
Post entry for receipt of payment from customer
OB08 Maintain ex rate type M as on 15.09.2012---- 1USD = 62 INR,
67 INR = 1 EUR
F-28 Incoming Payment
Amount in EUR = 310000 INR = 1/67*310000 = 4626.87 EUR
Valuation of Foreign Currency for GL accounts:
Scenario 1: Loan taken from bank 100000 USD on 01.08.2012 and
same to be revaluated every month until it is paid off:
Exchange Rate type M maintained as on (30.04.2012): 1 USD = 52
INR, 55 INR = 1 EUR
F-02 - We need to maintain GL 100301 in FAGL3KEH for default
profit center.
100000 USD = 5200000 INR, 5200000 INR = 1/55*5200000 = 94545.45
EUR
Foreign Currency Valuation In GL balance valuation reverse
postings do not take place automatically, hence Reverse postings
check box needs to be ticked under tab For GL balance
valuation.
While saving the document split did not work and GL 400506 was
defined in FAGL3KEH, as it had some documents of the past when
split was not activated. Similar scenario when tried for another
loan account 100303, no problem was there.
Another fresh loan account 100303 is created and foreign
currency valuation is run for the same.
On reset the reversal is not exact. The loss GL 400506 that was
debited earlier now debits with 300106 the gain GL. Unlike customer
vendor accounts, GL balances once valuated for foreign currency for
a specific period cannot be valuated again by fresh postings in the
same period. This is because unlike customer/vendor where document
no field is there to enter the fresh document, the same facility is
not there in GL balance. In case it is allowed, it will do
duplicate valuation for the already valuated GL balances.