Determination of Key Date Valuation Amount, Determination of Exchange Rate When The Combination of Souce Currency To Target Currency Missing During Foreign Currency Remeasurement For Cash

[lokesh2]

In this blog, i will try to explain the system posting logic in the determination of Key Date Valuation Amount, Gain/Loss Amounts in a                             Foreign Currency Remeasurement For Cash

We shall see how the the postings are determined based 'Foreign Currency Remeasurement Principles', For the explanation/understanding of the system logic we shall take one example here, we shall take the assignment of 002 - Lower Value as remeasurement principle

Go to Business Configuration work center, In the Fine-Tune Activity, Search for 'Foreign Currency Remeasurement for cash'

For this explanation we have assigned the method as A002 – Lowest Value in the activity 'Edit foreign currency remeasurement methods'

Let’s go to Edit foreign currency remeasurement methods

The assigned Accounting principle & Foreign Currency Remeasurement Methods combination can be seen

Also importantly, we need to maintain the Exchange rate between the foreign currency & the company currency then use foreign currency remeasurement to convert the balances of cash ledger accounts from foreign currencies into the company currency on a specific key date.

Now we shall slightly exchange the exchange rate validity and re-run to check the result again

So now if you compare the previous run and this run the key date exchange rate is changed from 6 to 15 and You use foreign currency remeasurement to convert the balances of cash ledger accounts from foreign currencies into the company currency on a specific key date and post gains and losses, resulting from exchange rate fluctuation.

But here you observe that with 6 % & 15 % exchange rate the key date valuation amount has not changed.

2500 * 6 =  15000 ; this value is correctly displayed in the previous run 2015-06-0*3

2500 * 15 = 37500 ; this value is not showing correctly in the current run 2015- 06-0*6

Reason being that If you see the data selection the Set of Book used is '9011' and for this the accounting principle maintained is '6000 – US-GAAP' ( Go to set of books activity to check this )

Now go to the fine-tune activity 'Foreign Currency Remeasurement Methods for Cash' and select Edit foreign currency remeasurement methods and select the Method as 'A002' and here,You can see Foreign Currency Remeasurement Principle maintained as 002 - Lower Value and now proceed with selection of the tab 'USE OF CASH' here you can see your accounting principle 6000 – US - GAAP which is assigned to the set of book - 9011.

Rule: Foreign Currency Remeasurement Principle maintained as 002 - Lower Value, what does this means

System will compare your ( Historic Valuation Amount & Balance Amount * applicable exchange rate ) and out of these two whichever is lower will be shown under Key Date Valuation Amount i.e., Lower of two values is taken as KEY DATE VALUATION AMOUNT

And out of 15,000 & 37,500, system took 15000

Additional Note: Apart from this key date valuation amount, If you see that system is picking an exchange rate which is not maintained in Edit Exchange Rate.

Pre-requisites to Check : Did you maintained the currency for the Source Currency to Target Currency ? If you have not maintained then system will try to check at least in the order of Target Currency to Source Currency and if the result Yes then the exchange rate is always 1/X, for instance ( 1/6 = 0.166667)

But usually it is always Source Currency to Target Currency Calculation but if No exchange rate is maintained for this combination then only the logic of finding the exchange will be vice-versa i.e., Target Currency to Source Currency when this logic is picked it 1/X.

Hope this post will be helpful to some extent.

Thanks

Lokesh Sharma