Simplifying your Foreign Currency Valuation Process
Most companies that run SAP typically carry out Foreign Currency Valuation that valuates an open transaction (customer or vendor invoice etc) or a foreign currency balance to the latest end of month spot rate and marks up or down the value of the Foreign Currency transaction.
This is a headache for many companies because of the simple reason that it is so hard to get a clean report out of SAP or simply because the volume of transactions makes it too hard to decipher the calculations. (Typically a good solid accountant should always cross check results with a spreadsheet – I always ask my users and my GL team to trust but verify 🙂 )
The SAP standard report that spools after the Revaluation transaction (FAGL_FC_VAL) executes is an unattractive report that adds to the mess.
I thought of a few ways in which the process of revaluation can be simplified and thus make month end slightly easy for both the user and the IT team and here are my suggestions:
- Create multiple valuation areas and distinct document types for different types of transactions. E.g. when running open AR valuation, create a separate valuation area and generate any valuation document with its own document type. Thus a valuation for an AR item could post doc type = “Z3”. This would enable easy differentiation of nature of transactions. Reporting would become relatively easy.
- Use Delta Logic for valuation and for cleared items: I discovered this process recently but nevertheless I did not hesitate to adopt it immediately because it solved so much of my data headaches. Delta Valuation is a configuration step in SAP. Delta valuation enables an open item or balance to be valuated in “delta” mode – i.e the entire entry is not reversed at the beginning of the month but instead the delta gain or loss is posted to SAP. And as a bonus, all cleared items that were cleared after revaluation ran but cleared in the same period or later are also effectively “revalued” – i.e a cleared item with a realized gain/loss is adjusted so that the unrealized entry is removed/offset only for the delta amount. Using Delta Logic eliminates reversal entries and thus halves your revaluation document count – huge savings and huge reduction in warehouse processing/reports processing.
- Build a good report that can report cash, AP, AR, Balance positions that also doubles up as a ‘working calculations report’. I recommend this report to be built in BOBJ – it is much easier to do this in a clean visual layout rather than ABAP ALV.
- Set up a job to run the revaluation program (or multiple variants of the revaluation program if you end up using step 1) and provide users with a screen to run this job replacing FAGL_FC_VAL. Trigger the job using an event and remove the whole date selection option from the hands of the users – I have noticed that users do make typical date related errors and taking this out of their hands thru a dynamic variable selection criteria makes a huge difference.
- Set up an alert/email to inform users that their job has executed.
I believe that the revaluation process needs to be easy to understand for both the user and for the SAP team and better SAP documentation/online help examples would greatly simplify the understanding of this process. An outstanding working calculation report shipped by SAP would also be greatly helpful. Otherwise users should ask for and be given a good quality “working report” which clearly elucidates the calculation logic for every single line item/balance entry. It is about time that the Forex revaluation process is simplified and made easy to understand.