Foreign Currency - Revaluation / Translation

[RahulGoyal]

Hi:

I wanted to discuss and understand the best practice for foreign currency revaluation and translation routine.

This is how we do and configured the revaluation / translation routine:

--

Valuation Area:

SG for revaluation - Currency Type 10 (Local)

S2 for translation - Currency Type 30 (Group)

Valuation Method: EVR (Always Valuate)

In the ledger currencies for 30, "Translation taking transaction currency as a basis".

Plus other coniguration for account determination (both revaluation and translation). - OBA1 and "Define Account detemination for currency translation".

Based on this configuration, we run following transactions at month end:

Revaluation: FAGL_FC_VAL using S2

Translation: FAGL_FC_TRANS using SG

So what it does is, it revalue document currency into local currency and then translate document currency into group currency.

Ideally, what should be as per GAAP is: Revalue document currency into local currency and then translate local currency into group currency.

In our configuration, we are not able to translate out of local books. The configuration translates from document currency to group currency.

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Are we missing anything in the configuration or this is standard? What is the best practice or how other companies are running the revaluation/translation routine?

Scenario is:

Document Currency: AUD

Local Currency: GBP

Group Currency: USD

Please advise.

Thanks.

Rahul

[shinas_rh]

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[Former Member]

Hi Rahul,

Could you please advice me if you found out a solution to revaluate in local currency without impact on group currency?

I have the same case. If you solved this issue, please give me a hint.

Thank you,

Apolzan

[RahulGoyal]

Hi Apolzan:

This is how we do it now:

1. Changed the configuration for ledger currency (group currency 30) to translate based on local currency

2. Run the revaluation - This revalue from document to local and also local to group. The local to group is basically your translation piece. This is called single step of revlauing you document books to local books and then in the same routine translate your local books into group books. This books to realized gain/loss account from reval config.

3. Then run the translation routine to cover up any other differences and reclass from realized gain/loss account to CTA (balance sheet account)

These steps gives us the results what we need as per US GAAP.

Let me know if any question.

Thanks.

Rahul

[Former Member]

Thank you, Rahul.

I will try it again and inform you soon.

Apolzan

[Former Member]

Hi Rahul,

One question more:

For translation program did you define in Financial Version Statement for each item the original account and revaluation account ?

Because my issue is: the remesurement in group currency start in every month from the document historical value in local currency and not from the last revaluation value of document (we use Delta valuation logic). From this reason the valuation amount in group currency is wrong.

Apolzan

[RahulGoyal]

Hi Apolzan:

Yes, we defined the FS version for translation. And the translation account is assigned to FS node (instead of individual account).

We maintain separate rates for balance sheet and P&L revaluation (and translation) routines.

Thanks,

Rahul

[Former Member]

Thank you Rahul for confirmation.

I prepared the customization in this way. I am waiting for the customer test.

Apolzan

[Former Member]

Hi,

We're having the same issue where FAGL_FC_VAL is not booking a group currency result. Did you ever get yours fixed?

Thanks

[Former Member]

Hi Rahul,

          Can you send the posting that you received when you did valuation 30?

Is this how your output looked when you carried out as revaluation run?

[RahulGoyal]

Any Suggestions please?

Thanks.

Rahul

[Former Member]

As per US GAAP, FASB 52 -

Step (1):-

Re-measurement - Revalue all the balance sheet accounts/open items with 'Document currency' other than 'Local currency' based on spot rate and post this difference to a P&L account (Unrealized Exchange Gain/Loss Account) in 'Local currency'. Do not impact the 'Group currency' here.

Step (2):-

B/S Translation - Revalue all balance sheet accounts from 'Local currency' to 'Group currency' based on the spot rate and post the difference to Cumulative Translation Adjustment account (CTA) in 'Group currency' only. CTA is balance sheet account.

Step (3):-

Unrealized Exchange Gain/Loss Translation - Revaluate the P&L account that's been used in step(1) for exchange differences, from 'Local currency' to 'Group currency' based on spot rate and post the difference to Cumulative Translation Adjustment account (CTA) in 'Group currency' only.

Notes:-

1) Equity and retained earning accounts are never revaluated.

2) CTA account is grouped together with Equity accounts in reporting.

Regards,

Ganesh

[RahulGoyal]

Thanks Ganesh.

Yes, that is the GAAP / FASB 52 interpretation. Thats what we trying to achieve in SAP.

We are okay with Step 1 (revalue balance sheet accounts or complete trial balance) from document currency to local currency with no group impact.

In Step2, when we run the translation, it translates document currency into group currency (instead of local to group). I wanted to check if we are missing anything in our configuration to enable local to group translation.

Please advise.

Thanks

Rahul

[Former Member]

Check the settings in OB22. You should have the following:

Currency Type - 30, group currency

Source Currency - 2, Translation taking first local currency as a basis

Regards,

Ganesh

[RahulGoyal]

Thanks again.

I have checked this configuration.

If we select 2 for group currency 30, then revaluation also has a group impact. Is there any other change we have to make to not have group impact of revaluation, if we change it to 2 in OB22?

Thanks,

Rahul

[Former Member]

Rahul,

Please provide me the follwing information from OB22 for 2nd Local currency, i'm guessing you might have Source currency as 1 (i.e. Translation taking transaction currency as a basis).

Crcy Type -

Valuation -

ER Type -

Srce curr -

TrsDte typ -

Regards,

Ganesh

[RahulGoyal]

Hi Ganesh:

OB22 for group currency (30):

Crcy Type - 30

Valuation - 0

ER Type - M

Srce curr - 1

TrsDte typ - 3

If I change the source currency to 2, then revaluation gives a group impact.

This is how other revaluation/translation settings is made:

SG for revaluation - Currency Type 10 (Local)

S2 for translation - Currency Type 30 (Group)

Valuation Method: EVR (Always Valuate)

Plus other coniguration for account determination (both revaluation and translation). - OBA1 and "Define Account detemination for currency translation".

Based on this configuration, we run following transactions at month end:

Revaluation: FAGL_FC_VAL using SG

Translation: FAGL_FC_TRANS using S2

Thanks.

Rahul

[Former Member]

Rahul,

Yes, you will see the group valuation impact once you change sotuce currency to '2'. After the change, 'Local currency' will be used as basis for convertion to "Group currency' in all GL documents and also in foreign currency revaluaiton step.

All other settings look good.

Regards,

Ganesh

[RahulGoyal]

Thanks.

Thats what I wanted to discuss and see how other companies are doing foreign currency revaluation and translation.

Two options:

Option 1 (with source currency 1 for group currency 30):

Revaluation : Document to local (no group impact)

Translation: Document to Group

Option 2 (with source currency 2 for group currency 30):

Revaluation: Document to local (with group impact)

Translation: Local to Group

--

But isn't these options against FASB 52?

FASB 52 says revalue document to local (no group impact) and then translate local to group. Can we achieve this in SAP?

Thanks.

Rahul

[Former Member]

Rahul,

The change we made till now, will ensure Translation: Local to Group. And you already have Revaluation: Document to local ( without group impact). This is FASB 52 compliant.

Please check the first step(1) i.e. 'Revaluation: Document to local', this should not have group valaution. The change we made in OB22 won't cause this. Unless you use valuation method/depreciation area 30 in transaction OBA1 (Prepare Automatic Postings for Foreign Currency Valuation).

Regards,

Ganesh

[RahulGoyal]

Hi Ganesh:

I am not sure if I followed your last response. May be i am missing something.

This is how OBA1 is configured:

Transaction: KDF

Chart of Account: ABCD

G/L Account: 2500004 (balance sheet account with open item managed)

Currency: <Blank>

Currency Type: <Blank>

Exchange rate gain/loss realized account: 6615118

Valuation gain/loss 1 accoint: 6615918

Balance sheet adjustment account: 2500904

Transaction: KDB

Expense Account: 6615918

E/R gains account: 6615118

--

Not sure where exactly you meant "valuation method/depreciation area 30 in transaction OBA1".

Please advise.

Thanks.

Rahul

[Former Member]

Rahul,

Based on your OBA1 settings, i can say that you don't use valuation method/depreciation area. So, Revaluation - Transaction to Local is fine and it's without group valuation impact. I think you are settings are FASBB 52 compliant..

In OBA1, when you click on key KDF a small screen pops up for 'chart of accounts', there is yellow arrow button 'Change Valuation area', this is used for revaluating multiple currencies (Transaction to Local & Local to Group) at the same time.

Regards,

Ganesh

[RahulGoyal]

Hi Ganesh:

Sorry to be pain. I am testing it right now. Switching the source currency from 2 to 1 (and 1 to 2) and running revaluation. Whenever it is 2 (as local to group), revaluation is giving me group impact. If I change it back to 1 (as transaction to group), revaluation has no group impact.

Just thinking how would system know that source currency 2 (in group currency 30) is for translation and dont look at it during revaluation routine. My understanding is that this setting controls all GL documents (converts all local documents into group including revaluation).

Are you referring to some other setting in revaluation routine which would stop group impact? We dont use valuation area in OBA1 as you pointed in last response.

Thanks.

Rahul

[Former Member]

Please check if you are running Foreign currency revaluation for all currency types, restrict this to currency type 10 for "Revalauation - Transaction to Local" and 30 for "Translation - Local to Group".

Also, please remove the "Translation adjustment accounts' in OBA1 for currecny type 10.

Regards,

Ganesh

[RahulGoyal]

This is how we run both the routines:

Revaluation: FAGL_FC_VAL using SG valuation area (and SG is configured as currency type 10)

Translation: FAGL_FC_TRANS using S2 valuation area (And S2 is configured as currency type 30).

We don't run it with blank valuation area.

In OBA1, as I said in earlier post, we dont use currency type. Currency type is blank in all the GL Accounts.

Thanks.

Rahul

[former_member649843]

Hi Venkat,

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