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SAP Currency management Currencies are legal means of payment in
a country.
For each monetary amount that we enter in the SAP system, we
must specify a currency. Currencies are entered as per ISO
standards, for example, USD for US dollar, INR for Indian Rupee
Few common terminologies associated with Currencies are as
follows:
a) Reporting currency is the currency used in presenting the
financial statements.
b) Foreign currency - is the currency other than the enterprise
currency.
c) Group Currency - A group currency is used in the consolidated
financial statements. Before the consolidation process can be
completed, all values in the individual financial statements must
be translated from the local or transaction currency into group
currency
d) Company currency: A currency used for internal trading
partner
e) Hard Currency: A country specific second currency used in
countries with high rate of inflation.
f) Index currency: A country specific theoretical currency used
in some countries with high inflation as a comparison
currency for purpose of statutory reporting.
g) Exchange rate is the ratio for exchange of two currencies as
applicable to the realization of certain assets or the payment of
specific liability and even recording of specific transactions or
group of transactions.
h) Average rate is the mean of exchange rates in force during a
period.
i) Forward rate is the exchange rate established by the terms of
an agreement for exchange of two currencies at a specified future
date.
j) Closing rate is the exchange rate at the balance sheet date.
k) Monetary items - are money held and assets & liabilities to
be received and paid in fixed or determinable amounts
of money e.g. cash receivables and payable. l) Non-monetary
items are assets and liabilities other than monetary items e.g.
fixed assets, inventories, investment
in equity shares. m) Settlement date is the date at which
receivable is due to be collected or payable is due to be paid. n)
Recoverable amount is the amount which the enterprise expects to
recover from the use of asset including its
residual value on disposal
Below step explains configuration for currencies and foreign
currency valuation
Check Currency codes Set Decimal places for currencies Check
Exchange Rate Types Define translation ratio for currency
transactions Currency Exchange Rates
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Define Valuation Method Prepare Automatic postings for foreign
currency valuation Define maximum exchange rate for difference per
company code Additional Local Currency for Company Code Rounding
Rules for Currencies GL Master Data Execute Foreign exchange
valuation F.0
Check Currency codes T.Code OY03
You may use several SAP currency keys for the same ISO code. To
ensure a unique assignment of the ISO code to an SAP currency key,
one of the SAP currency keys must be selected as the primary
currency key for the ISO code. If the assignment between SAP
currency key and ISO code is unique, you do not need to select this
field.
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Set Decimal places for currencies T.Code OY04
Example: One OMR / INR =159.81832
Check Exchange Rate Types T.Code OB07 EMU Indicator: Exchange
rate type uses special translation model If you set this indicator
it means that the SAP System internal translation modules calculate
using a different algorithm. The algorithm has been adjusted to
meet the European Monetary Union statutory guidelines. The
indicator must be set if the statutory conversion rules agreed by
the participating countries in the EMU are to be used. This
procedure is not effective if calculation is to be undertaken using
bank selling rates, bank buying rates and exchange rate spreads. If
you set this indicator, you must specify a reference currency.
Fixed Indicator: Exchange rate type uses fixed exchange rates
Describes an exchange rate type that works with fixed exchange
rates. Exchange rate fixing affects the application if exchange
rates are to be calculated from currency amounts you have entered.
In this case, the system may continue processing using the fixed
exchange rate instead of the exchange rate calculated. If exchange
rates other than the fixed exchange rates are used, the system
displays warning messages or error messages. Example
1. As from 01.01.1999, the currencies of the Member States of 2.
European Monetary Union are fixed. 1.2. If the exchange rate type
is G (which functions as the bank buying rate to the average rate
M) and this indicator is
set, one fixed exchange rate only is used.
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Define translation ratio for currency transactions T.Code
OBBS
The Currency Translation Ratio identifies the relationship of
the units of one currency to the units of another. It is not
possible to maintain exchange rate in the system without
maintaining the translation ratio for the currency pair. It is
essential to maintain these ratios for each exchange rate type
& currency pair
Currency Exchange Rates T.Code OB08
If you maintain the exchange rates on a daily basis, you should
delete the exchange rates that you no longer required, so that
there are not too many entries in the system. We do not have to
enter all exchange rates. There are many tools that can be utilized
to automatically determine other exchange rates from existing
ones.
Example:
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Define Valuation Method T.Code OB59 SAP uses exchange rate type
M to value all foreign currency items. M is the average rate for
any foreign currency. In this step, 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. Before every valuation run, you specify the
required valuation method. SAP provides various Valuation methods.
We can also create our own key starting with Z
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Lowest Value Principle The Valuation is only displayed if the
valuation difference between the local currency amount and the
valued amount is negative that is an exchange loss is taken place.
The valuation is carried out per item total. Strict Lowest Value
Principle The valuation is only displayed if, as a consequence, the
new valuation class has a greater devaluation and/or a greater
revaluation at credit entries than the previous valuation. The
valuation is calculated per item total. Always Valuate If you
select this procedure, revaluations are also taken into
consideration. Revalue only if you select this procedure, system
only does a revaluation if applicable but does not do devaluation
where there is exchange loss. Reset- if you select this parameter,
then the open items is valuated at the acquisition price. This way
the valuation difference is set to zero. The old valuation method
is reset. The account determination is reversed. The revenue that
arises is posted to the expense account. Exchange rates are types
that are attached to the valuation methods. Determine rate type
from account balance- If you select this field, the account
balance/group balance in the relevant foreign currency is used to
determine the exchange rate type. This is relevant for account
balance revaluation Prepare Automatic postings for foreign currency
valuation T.Code OBA1
KDB: Exchange Rate difference in foreign currency balances e.g.
bank accounts held in foreign currency
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Exchange Rate Difference key: Can be kept blank or you can enter
a key with 4 digits e.g. 0001. In case you create this exchange
rate key then the same has to be updated in the GL code of the
foreign currency account i.e. the control data tab which has the
field exchange rate difference key. Only when it is attached, the
system will reevaluate the foreign currency account. Expense
account: We need to enter the expense GL code for unrealized
foreign exchange loss E/R gains: You need to enter the revenue GL
coded for unrealized foreign exchange gain Unrealized and will be
automatically reversed in the next month KDF: Here we will enter
the GL codes for AR and AP (the reconciliation account)
GL account: Reconciliation account Realized Gain 754013
Unrealized gain 755021 Realized Loss 654013 and unrealized loss
655021 Creditors revaluation 271190
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RDF: Internal currencies rounding difference Transaction code
OBYC There can be exchange rate difference on account of document
posted through MM process, in such cases we need to maintain the
exchange gain/loss account for KDM (Materials management exchange
rate difference) key using Transaction code OBYC. Exchange rate
differences in the case of open items (KDM) Exchange rate
differences in the case of open items arise when an invoice
relating to a purchase order is posted with a different exchange
rate to that of the goods receipt and the material cannot be
debited or credited due to standard price control or stock under
coverage/shortage.
Now system will post the arising Gain/loss automatically to the
assigned GL account, for this purpose default cost centers are
required to be maintained for the gain/loss accounts to which the
posting will be done using transaction code OKB9
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Define maximum exchange rate for difference per company code
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Additional Local Currency for Company Code T.Code OB22
Rounding Rules for Currencies T.Code OB90
Rounding of currencies
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OBS2 GL Master Data
Foreign currency valuation at month end for open items F.05
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Example of Transaction posting FX Vendor invoice posted with
document currency in USD 1000 on 01.01.2012
Month end 31.01.2012 executed F.05 01.01.2012 exchange rate
31.64220 31.01.2012 exchange rate 31.27000
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Amount credited to unrealized exchange gain
The next month on 01.02.2012 first day amount paid
Check the cost center accounts for realized and unrealized
accounts.