Foreign Currency Valuation Configuration and Scenarios:

List of GL accounts to be defined for foreign currency valuation

1. Andhra Bank Term Loan Account in USD ----------100301 (exchange rate diff key USD) B/S
2. 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/S
7. 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 Methods

IMG 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 path

You 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 Principles

FA 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 Valuation

Don'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 30 th April 1USD= 52 INR, and 55 INR=1
EUR
At 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.