| | Currency differences accountsCurrency differences can make the
financial analysis and reconciliation more complex. These types of currency
differences can occur: Currency differences Currency result caused by fluctuations in the exchange rate,
for example, if the rate differs between the invoice date and the payment date. Exchange gain and loss Currency result caused by the use of different exchange rate
types, for example, the Sales rate
type and the Internal rate type, or if by means of the rate
determiner you have changed the exchange rate for a transaction during the
order handling procedure. Translation gain and loss Currency result caused by the use of different currencies
during the order handling procedure, for example, if the order currency or the
payment currency differs from the invoice currency. Destination gain and loss Currency result caused by different results when the
transaction currency is converted to the various home currencies. Destination
gain and loss can only occur in an independent currency system.
To support good reconciliation possibilities, currency
differences and exchange gain and loss are posted to these accounts: Exchange Gain and Loss For differences between related amounts (debit and credit
postings) due to different exchange rate types or different currency rates. Currency Translation For transactions of which the debit posting and the credit
posting are made in different currencies. Currency Differences contra account For currency differences on the invoice accrual account due to
rate changes between the receipt date and the approval date of the invoice and
calculated when you close a financial period.
Exchange Gain and Loss account Differences between related amounts due to different exchange
rate types or different currency rates are posted to an Exchange Gain and Loss
account. The exchange gain and loss is calculated at the time when you post the
integration transactions to the General Ledger. The difference amounts are posted to the statutory account
that you can select for each company or currency: - For a company, in the Statutory Exchange Gain/Loss Account field on the Destination Gain/Loss tab of the Company Parameters (tfgld0503m000) session.
- For a currency, in the Statutory Exchange Gain/Loss Account field of the Additional Currency Features (tfgld0129m000) session.
Example of Exchange Gain and
Loss To a purchase order, this data applies: - Purchase order amount: 100 USD
- Local currency: EUR
- Internal exchange rate: 1 USD = 0.937012 EUR
- Purchase exchange rate: 1 USD = 0.936344 EUR
This results in these postings for the Purchase Order/Receipt
transaction: | Type | Account | Amount (Debit) | Amount (Credit) |
|---|
| Debit | Interim Transit | 93.70 EUR | - | | Credit | Invoice Accrual | - | 93.63
EUR | | Credit | Exchange Gain and
Loss | - | 0.07
EUR |
Currency Translation account Related amounts in different currencies are posted to a Currency
Translation account. Every transaction in different currencies on the Invoice
Accrual account has a one-to-one relationship to a transaction on the Currency
Translation account. For example, if a sales order amount is expressed in USD and the
invoice currency is CAD, the sales order amount and the invoice amount are
posted to the Currency Translation account. When you approve the invoice, the
invoice amount is converted to the order currency with the currency rate of the
invoice date and time. If the calculated order amount differs from the original order
amount, these rules apply: - If the difference is due to currency rate changes between the
order date and the invoice date, the difference is posted according to the
mapping defined for the Currency Difference integration document type.
- If no currency rate changes occurred, the difference amounts
are posted according to the mapping defined for the Purchase Order/Price
Variance integration document type, using the Currency Translation account as
an interim account.
You can select the Currency Translation accounts and dimensions
for the financial company in the Company Parameters (tfgld0503m000) session. For the Currency Translation accounts, do not set the Currency Analysis field to Required, Calculate Currency Diff. in the Chart of Accounts (tfgld0508m000) session. Example of currency translation The order currency of a purchase order is USD and the invoice
currency is CAD. For the integration transactions, these postings are
made: | Event | Type | Account | Currency |
|---|
| Receipt | Debit | Inventory | Local currency converted from USD, with order
rate. | | Receipt | Credit | Invoice Accrual | USD | | Invoice registration | Debit | Registered Invoices | CAD | | Invoice registration | Credit | ACP Control Account | CAD | | Invoice approval | Debit | Invoice Accrual | USD, converted from CAD, with invoice rate. | | Invoice approval | Credit | Registered Invoices | USD | | Payment | Debit | Currency translation | CAD | | Payment | Credit | Currency translation | CAD | | Payment | Debit | ACP Control Account | CAD | | Payment | Credit | Bank account | CAD |
Currency Differences contra account Currency differences are calculated and posted to a Currency
Differences contra account. For every Operations Management transaction (for every
reconciliation area), LN provides a separate integration document type for the mapping of
the currency differences. The transaction type used to post the currency
differences must be of the Journal Vouchers category. All postings on the Invoice Accrual account are made in the
transaction currencies. Therefore, if you run the Calculate Currency Differences (tfgld5201m000) session when you close a financial period,
these transactions are included in the process. Differences between the receipt
amount and the invoice amount due to rate changes between the receipt date and
the approval date of the invoice are posted to a separate contra account for
currency differences on the invoice accrual. These rules apply to the Currency Differences contra
accounts: - A unique contra account is linked to each ledger account on
which the transaction currency can be different from the home currencies. When
you create such a ledger account, for example, a WIP account or a cash account,
you must define the Currency Differences contra account for the ledger account.
- The Currency Differences contra account must have the same
parent account as the account to which it is linked.
- The Currency Differences contra account must be a Statutory account of the Balance Sheet type. As the account is a control account, you cannot create
manual transactions on the account.
- In the Chart of Accounts (tfgld0508m000) session, on the Dimensions tab, the settings of the Currency
Differences contra account must match the corresponding settings of the newly
created ledger account to which it is linked. If they do not match, LN will prompt you to
make the settings match. Provided that the Integration Account check box is unavailable, the
same (new) account can be used as contra account as well. In that case, the
dimension options can be selected as required.
Some examples of accounts that require a Currency Differences
contra account are: - From the integrations: WIP accounts and GDNI accounts.
- Internally in Financials: bank accounts, cash accounts, and so
on.
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