Foreign Currency Valuation: This is the process to translate and adjust foreign currency amount of monetary accounts to local amount by a current suitable exchange rate (standard exchange rate). We carry out the foreign currency valuation before we create the financial statements. The valuation includes the following accounts and items:
1), Foreign Currency balance sheet accounts, that is , G/L accounts that we manage in a foreign currency (the balances of the G/L accounts in foreign currency are valuated)
2), Open items (Customers, Vendors, G/L accounts) posted in Foreign Currency( the line items are valued)
Configure Foreign Currency Valuation
Transaction Code FAGL_FC_VAL valuates open items in foreign currency as wells as the foreign currency balance sheet accounts.
In order to carry out a foreign currency Valuation, we need to make certain settings in the customizing:
- Currency Customizing
- Defining the Valuation Method
- Defining the G/L account for exchange rate differences from the valuation.
We must also specify balance sheet adjustment accounts for receivable and payable accounts.
Customizing for FC Valuation in SPRO -> OB59 & OBA1.
Step1. Use Tcode OB07 to configure the Exchange rate type,
say B – Bank selling, G – Bank buying & M Average rate.
Step 2. Use Tcode OBBS to maintain a translation ratio for the 2 currency which you want to create, say USD : INR.
Here you will find direct quotation & indirect quotation according to your requirement you need to maintain.
Step 3. Use Tcode OB08 to maintain the Exchange rate, validity period of that exchange rate.
To record the profit & loss gained through the difference in exchange rate, you can do that through the following steps
1.Use Tcode OB59 to configure valuation method, in the screen check the check box valuate all the time & do the remaining settings.
2. create 2 G/L a/c 1 to record profit & other to record loss incurred through exchange rate, that should be auto posting.
3. Use Tcode OBA1 to assign those G/L to automatic posting.
Give your chart of account and 2 G/L you have created.
Step 4. Next use Tcode F.05 to execute the Forex Run.
Also See: Foreign Currency Revaluation F.05 Issue
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