In this blog, I want to introduce how the system handles exchange rates of foreign currencies during the creation of target documents from base documents in Version 8.8 onwards. The functionality has been enhanced to enable consistency through the base and target documents.
Firstly, I will cover the Draw Document Wizard. When using the ‘Copy From’ function to copy a target document from a base document, three options for Copy Exchange Rate are provided in the Draw Document Wizard.
1) Use Row Exchange Rate from Base Doc:
If the row currency is different to the document header currency, this option means the user is requesting to use the row exchange rate of the base document, and for the document header exchange rate, the user request to use current exchange rate.
In the sample cases of this blog, LC is GBP. Both EUR and USD are FCs.
And the Exchange Rate Posting is set as ‘Indirect’
The BP currency is USD, but input EUR 100.00 in the Unit Price when creating the Delivery.
The system calculated as:
EUR 100.00 / 1.5 = GBP 66.67 * 0.8 = USD 53.34
When copied to the AR Invoice, the system calculated as:
EUR 100.00 / 1.5 = GBP 66.67 * 0.9 = USD 60.00
That is to say, the system will use the row exchange rate of base document to calculate the LC amount and then use the current exchange rate to calculate the header FC from the LC.
If display the base document and target document in LC, we will find that the LC amounts of both documents are the same.
If the row currency is the same as the document header currency, the current system exchange rate will always be used. And a message box 'Base document exchange rate cannot be used; the rows will be updated using the target document exchange rate.' will pop up to notify the user.
The system will use directly the current system exchange rate in the target document.
If display the documents in LC, we will found the system calculates as:
Delivery -> USD 100.00 / 0.8 = GBP 125.00
AR Invoice -> USD 100.00 / 0.9 = GBP 111.11
2) Use Document and Row Exchange Rate from Base Doc:
This option means for both document and row, the user request to use base document exchange rate.
As the following sample, both base document and target document are using the exchange rate of the base document.
EUR 100.00 / 1.5 = GBP 66.67 * 0.8 = USD 53.34
3) Use Current Exchange for Document and Row:
This option means for both document and row, the user request to use the current system exchange rate.
In the following sample, input EUR 100.00 in Unit Price when creating the Delivery
The system calculated as:
EUR 100.00 / 1.5 = GBP 66.67 * 0.8 = USD 53.34
When copied to the AR Invoice, the system calculated as:
EUR 100.00 / 1.2 = GBP 83.33 * 0.9 = USD 75.00
If display the Delivery and the AR Invoice as LC, they will be as following:
2. Document Generation Wizard
There are these three options in Document Generation Wizard, too. The user can choose one in Step 2 of 8 in the wizard.
3. Special Cases:
There are several special cases in which the system follows different behaviors.
First case is Copy Tax Amount. In some specific localizations (for example, Japan), there is a function of 'Tax Amount' and this will also affect the result of Copy Exchange Rate.
If the user chooses ‘Use Current Exchange from the Exchange Rate Table’, this function is not available.
When using Copy Tax Amount from Base Document the system will use base document's header and row exchange rate, no matter what option user chooses for Copy Exchange Rate. If the user chooses 'Use Row Exchange Rate from Base Doc', a message box 'System exchange rate cannot be used; the document will be updated using the base document exchange rate' will pop up to notify the user that they could not use current system exchange rate.
In the following sample cases, JPY is LC. Both EUR and GBP are all FCs.
The Exchange Rate Posting in JP local is usually set as ‘Direct’.
In JP local, usually, the decimals of Amount and Price are all Zero.
VAT Rate = 5%
The calculation in both Delivery and AR Invoice are as following:
EUR 1,000 * 101.67 = JPY 101,670 / 121.85 = GBP 834
VAT = GBP 834 * 5% = GBP 42
When using Recalculate Tax Amount the tax amount of the target document will be recalculated accordingly.
So if choosing both 'Use Row Exchange Rate from Base Doc' and ‘Recalculate Tax Amount’, the system will calculate as following:
Input EUR 1,000 in the Unit Price of Delivery, the system will calculate:
EUR 1,000 * 101.67 = JPY 101,670 / 121.85 = GBP 834
VAT = GBP 834 * 5% = GBP 42
When copy the Delivery to an AR Invoice, the system will only use the row exchange rate of Delivery and recalculate the Tax Amount:
EUR 1,000 * 101.67 = JPY 101,670 / 130.15 = GBP 781
VAT = GBP 781 * 5% = GBP 39
So if choosing both ‘Use Doc and Row Exchange Rate from Base Doc' and ‘Recalculate Tax Amount’, the calculation result would be the same with ‘Copy Tax Amount from Base Document’, because both the row and header exchange rate of base document are used.
Another special case is the use of Continuous Inventory. If a company is using continuous inventory, and the document currency is not local currency or system currency is not local currency, then in the following cases, the row exchange rate will use the base document exchange rate.
(a) Base document is GRPO and target document is Goods Return
(b) Base document is Goods Return and target document is GRPO
(c) Base document is Reserve Purchase Invoice and target document is GRPO
A message box 'System exchange rate cannot be used; the document will be updated using the base document exchange rate' will pop up to notify the user if the user chooses 'Use Row Exchange Rate from Base Doc' or 'Use Current Exchange for Document and Row'.
The third special case is Correction Invoice. If the target document is AR/AP correction invoice or AR/AP Correction Invoice Reversal, both document exchange rate and row exchange rate will use Base Exchange Rate.
Credit Memo - If the target document is AR/AP credit memo and the base document is invoice or AR/AP down payment both document exchange rate and row exchange rate will use base exchange rate and a message box 'System exchange rate cannot be used; the document will be updated using the base document exchange rate' will pop up to notify user if user chooses 'Use Row Exchange Rate from Base Doc' or 'Use Current Exchange for Document and Row'.
Copying multiple base documents with different exchange rates into one target document. If you copy multiple base documents with different exchange rates into one target document, SAP Business One calculates the amounts of the target document using the exchange rate set for the posting date of the target document. If the user chooses 'Use Row Exchange Rate from Base Doc' or ‘Use Doc and Row Exchange Rate from Base Doc’, a message box ‘Base document exchange rate cannot be used; the rows will be updated using the target document exchange rate.' will pop up to notify the user that they could not use base exchange rate.
In the Draw Document Wizard, if the user has selected the option ‘Use Base Doc. and Row Rate’, the system will also give the same message.
4. ‘Use Document Exchange Rate When Copying to Target Document’ in Document Settings
In Administration -> System Initialization -> Document Settings -> General tab, option ‘Use Document Exchange Rate When Copying to Target Document’ is provided. This option will affect the exchange rate when using ‘Copy To’ function.
If this option is unchecked, the current exchange rate will be used in the target document. If this option is checked, the base document exchange rate (both Doc. and row) will be copied to the target document.
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