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In this document, I have tried to present an example to understand Realized Foreign Exchange Gain/Loss and related postings in SAP in simple terms. Please note that Forex Revaluation which is a Month End Process is a slightly different concept than presented here. The concept below works when we clear Customer/Vendor/G/L line items which results in Actual Foreign Exchange Gain/Loss.

Configuration in OB22 for Parallel Currencies

As per the settings above

  • Translation to Local Currency is as per Translation Date and taking Transaction currency as basis
  • Translation to Group Currency is as per Translation Date and taking First Local currency as basis

Customer Document Posted

Customer Document Clearing Posted

A difference of 0.30 CAD (Local Currency) was debited as Forex Loss and 1.56 USD (Group Currency/Local Currency2) was credited as Forex Gain

To understand the posting, we need to look at the OB09 settings of the Recon Account for the customer, OB08 rates on the Customer document posting date and Clearing document posting date and calculate the Realized Gain/Loss

Recon Account of the Customer: 11000

Forex Gain/Loss calculation in Local Currency

————————————————————–

Document Currency = CNY

Local Currency = CAD

Exchange rate type ‘M’ is to be used for translation as per OB22 settings and the Translation is to happen from Transaction Currency

USD is the intermediary currency for exchange rate type ‘M’. So, translation from CNY to CAD will be calculated using CNY-USD and CAD-USD exchange rates from OB08 as on the Customer document posting date and Clearing document posting date

Customer Document Posting Date : 10th Feb 2016

Clearing Document Posting Date : 20th Feb 2016

OB08 Rates

Customer Document Clearing Posted

Customer Line item Amount in CAD (from Customer Document Posted)

=Amount in CNY * (CNY-USD rate as on 02/10/2016) / (CAD-USD rate as on 02/10/2016)

= 1250 CNY * 0.15209 / 0.71929

= 264.31

Clearing Line item Amount in CAD (from Clearing Document Posted)

=Amount in CNY * (CNY-USD rate as on 02/20/2016) / (CAD-USD rate as on 02/20/2016)

= 1250 CNY * 0.15335 / 0.72605

= 264.01

Hence, Forex Loss in Local Currency = 264.01-264.31 = 0.30 CAD posted to Account 81160 as per the setting below.

OB09 settings for Currency Type 10 (Local Currency) and Recon Account 11000

Forex Gain/Loss calculation in Group Currency (Local Currency2)

——————————————————————————————

Document Currency = CNY

Local Currency = CAD

Group Currency (Local Currency2) = USD

Exchange rate type ‘M’ is to be used for translation as per OB22 settings and the Translation is to happen from Local Currency

USD is the intermediary currency for exchange rate type ‘M’. So, translation from CAD to USD will be calculated using CAD-USD exchange rate from OB08 as on the Customer document posting date and Clearing document posting date

Customer Document Posting Date : 10th Feb 2016

Clearing Document Posting Date : 20th Feb 2016

OB08 Rates

Customer Document Clearing Posted

Customer Line item Amount in USD (from Customer Document Posted)

=Amount in CAD * (CAD-USD rate as on 02/10/2016)

= 264.31 CAD * 0.71929

= 190.12

Clearing Line item Amount in USD (from Clearing Document Posted)

=Amount in CAD * (CAD-USD rate as on 02/20/2016)

= 246.01 CAD * 0.72605

= 191.68

Hence, Forex Gain in Group Currency (Local Currency2) = 191.68 – 190.12 = 1.56 USD posted to Account 81160 as per the setting below.

OB09 settings for Currency Type 30 (Group Currency) and Recon Account 11000

Link to understanding Unrealized Gain/Loss –> Foreign Currency Valuation Simplified

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9 Comments

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  1. Syed Zia Abbas

    Dear Sowmya

    I am facing an issue with my client, where in they have done all these postings correctly except for few glitches mentioned below;

    1) They forgot to reverse the last year reversal of FAGL_FC_VAL in Jan 2015, as they are following the monthly reversal procedure.

    2) They have posted BRS (manual) via F-03, which is a wrong method, as system did not posted realized Forex and that got added to their Main Bank Account.

    Now when they are closing the main bank account, system should nullify the balance in both Local Currency and also in Foreign Currency. But it is not happening so and the balance stands in Local currency where as Balance in Foreign Currency is Zero.

    Can you please share you inputs here? If you want I can share the test document with screenshot with you.

    Appreciate your effort. Thanks

    Syed Zia Abbas

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    1. Sowmya Tiwary Post author

      Hi Syed

      I would advice that you start a discussion thread for this which is the correct way and you will get many more replies. But, since you asked:

      1. They forgot the reversals in Jan 2015? It is more than a year back. How did they close their FY?? Reversals must be automatic instead of manual.

      2. F-03 does post FX differences. You can simulate a document and see.

      Regards

      Sowmya

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      1. Syed Zia Abbas

        Dear Sowmya

        Reversals does not happen automatic, as it is saved in the batch session and batch need to be run again next month when next period is open (We do not keep more than one period open at a time).

        Regarding F-03, I myself said that they have done wrong by using F-03.

        Anyways, I am looking into options.

        Thanks for your inputs.

        Regards

        Abbbas

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        1. Sowmya Tiwary Post author

          Hi Syed

          Reversals are through Batch Input session. What I meant was, if you follow correct closing procedures, FCV is run at month end WD-1 or WD+1 when the next period is already open. So, reversals also get posted at the same time.

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