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Explain about the entire real time process for month
end for foreign currency revaluation.
By: Murthy Let me explain the process in Detail. First you need to understand Process of Revaluation. I am not going into Customisation Paths. Valuating Foreign Currency Balance Sheet Accounts Your foreign currency balance sheet accounts are valuated as part of the foreign currency valuation:
The balance of your fixed term deposit account (foreign currency balance sheet account) has a balance of 1000 USD and 1700 DEM (see the following illustration, 1). An exchange rate devaluation occurs at the time of the
valuation.
As a result of the valuation, a difference arises in your local currency. However, only postings in the foreign currency specified in the master record (account currency) are permitted to foreign currency balance sheet accounts. The exchange rate difference is therefore posted with a foreign currency amount of zero, and a local currency amount equal to the exchange rate difference. To valuate your foreign currency balance sheet accounts, you must define expense and revenue accounts for exchange rate differences. Valuation of open items in foreign currencies
You have posted a receivable in the amount of 1000 USD, at an exchange rate of 1.7000. The local currency is DEM. The system saves the receivable in local currency in the customer and receivables accounts (1700 DEM) (see following illustration, 1). An exchange rate devaluation occurs at the time of the valuation and the exchange rate is now 1.6300. The receivable in the amount of 1700 DEM remains in the receivables account. The program posts the reduction to the receivable (70 DEM) to a financial statement adjustment account and the exchange rate difference to the account for exchange rate differences from the valuation as an offsetting posting (see following illustration, 2). The receivables account and the relevant financial statement adjustment account are reported in one item in the financial statements. This means that the amount of the receivable in the financial statements is the valuated amount (1630 DEM). To valuate your foreign currency balance sheet accounts,
you must define certain accounts.
You have the following options for valuating open items in foreign currency:
To do this, select the indicator Valuation for FS preparations on the Postings tab. The exchange rate differences saved in the document are taken into account for payment clearing:
If the first valuation results in an exchange rate difference of 30 DEM, and the current valuation results in an exchange rate difference of 10 DEM, an exchange rate difference of 20 DEM is posted and 10 DEM is saved in the line item as the final valuation difference.
You therefore have the option of determining exchange rate differences at any point in time without this valuation being taken into account for the creation of financial statements or for payment clearing. To do this, select the indicator Reverse postings on the Postings tab. |
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