Standard currency system

Direct translation of foreign currency transactions

Foreign currency transactions are translated straight from the transaction currency to the local currency, without triangulation through the reference currency. By default, reporting currencies are directly translated from the transaction currency into the reporting currency. However, reporting currencies can also be translated from the local currency.

Integrations and multiple reporting currencies

Transactions can be recorded in one local currency and up to two reporting currencies. Only the local currency amounts are logged in the integration transactions, fixed assets, and reconciliation data. Before reporting in one of the reporting currencies, reconciliation of subledgers in the company’s local currency must take place. Adjustment of reporting currency balances for currency differences is supported by the Calculate Currency Differences (tfgld5201m000) session, which can be run for the local and the reporting currencies independently. For each of the home currencies the differences will be posted in separate transactions. Reconciliation of integration transactions on business object level is only possible in the local currency.

Multiple home currencies

A home currency is the local currency, or a reporting currency used by a company for preparing the financial statement. Amounts in foreign currency are translated into amounts in any of the home currencies by using direct currency rates for the local currency and, depending on the Translation Method setting in the Companies (tcemm1170m000) session, either the transaction, or the local currency amount for the translation into the reporting currency amounts.

Currency rotation

Rotate Currency functionality is available:

In General Ledger, ledger history and dimension history sessions.
In Accounts Payable and Accounts Receivable, sessions that display information on open items.

In these sessions, within a single company, Rotate Currency is available for every implemented home currency. Within a multicompany selection, Rotate Currency is available for every common currency, using reporting currency groups.

Because reporting currencies are translated according to predefined rules and rate types, currency rates for the reporting currencies cannot be modified during transaction entry.

Currency rates retrieved from the Internet

Import of currency rates from the Internet is enabled by the ISO Currency Code field in the Currencies (tcmcs0102m000) session.

To import the currency rates, you must write your own program. LN only provides the interface.

Calculation and posting of currency differences

The Calculate Currency Differences (tfgld5201m000) session can be run for each home currency separately and independently. The currency differences calculation process also considers the exchange rate type, specified on the ledger account, for the local and the reporting currencies independently.

Currency difference transactions are always created for each home currency separately.

The method of calculating currency differences depends on the Translation Method setting in the Companies (tcemm1170m000) session.

Interim accounts

For several interim accounts, the original posting and the account clearing posting are not transacted in the same currency. For example, the purchase receipt / warehouse receipts that post over the interim transit 3 account, can have different transaction currencies. The purchase receipt may be in US dollars, whereas the warehouse receipt is always transacted in the local currency of the warehouse. In this case, a currency translation will take place, using the account that is defined in the Finance Company Parameters (tfgld0503m000) session. LN will detect any difference between the transaction currencies within a pair of debit/credit postings (one of these being the local currency of the particular company), and automatically create the additional translation transactions.

Intercompany transactions

Intercompany transactions are reconciled in the transaction currency. For calculating the local and reporting currency amounts in intercompany transactions, only the transaction amount is used.

If required, in the standard currency system, intercompany accounts can be defined by transaction currency, meaning that the transaction currency determines to which intercompany account the transaction is posted.

Chart of accounts

For each financial company, reporting rate type characteristics can be defined on ledger account level in the Ledger Account Settings by Individual Account (tfgld0128m000) session. Here, you can set the reporting rate type to:

Adopt Transaction's Exchange Rate Type
Own Exchange Rate Type
Company's Default

If set to Own Exchange Rate Type, a rate type for the particular reporting currency must be entered. If no characteristics are entered for a specific ledger account, LN will use the company’s default defined in the Companies (tcemm1170m000) session.

Tax accounts of the same financial company and tax origin (purchase/sales), as well as control accounts of the same financial company and origin (supplier/customer), must have the same reporting rate types characteristics. Therefore, reporting rate type features will be definable on these levels as well.

Use of exchange rate types

To translate the transaction amount into the local currency amount, LN uses the rate belonging to the exchange rate type specified on the transaction. The currency rate used for the translation into the reporting currency depends on the exchange rate type specified on the ledger account to which it is posted.

Cash transactions will typically be translated against the spot exchange rate whereas monthly rates can be used for inventory and work in process. Typical exchange rate types known are daily rates, average rates, and monthly rates.

The calculate currency differences process can retrieve a rate based on the ledger account exchange rate type.

Multiple reporting currencies in Accounts Payable and Accounts Receivable

The open entries in the Accounts Payable and Accounts Receivable modules are recorded in the company’s local currency and reporting currencies.

In the standard currency system, local currency amounts are translated using the exchange rate type as specified on the transaction. Reporting currency amounts are calculated using the exchange rate type as specified on the control ledger account. Within a financial company, all control ledger accounts in a business partner group must have the same exchange rate types for the reporting currencies.

Multiple reporting currencies in tax analysis and reporting

Because the same currency can be used as home currency more than once, it is possible to choose which home currency is used for tax analysis and which for tax declarations. This is useful to facilitate legal compliant reporting using a specific set of rates for tax. In the tax declaration master you can select the home currency position to be used in the tax declaration.

LN calculates reporting currency amounts using the exchange rate type as specified on the tax ledger account. Within a financial company, all purchase tax ledger accounts must have the same exchange rate types for the reporting currencies. The same applies to the sales tax ledger accounts.

Write off currency differences on the ACP/ACR control accounts

LN calculates reporting currency differences using the exchange rate type and rate as specified on the control ledger account for each home currency. For each of the home (local and reporting) currencies, the currency difference is posted using a separate financial transaction.

Reference currency

In the standard currency system, the reference currency:

Can be defined independently of the local and reporting currencies.
Can be, but does not have to be, one of the home currencies.
Can be used to express amounts that represent amounts across multiple companies, for example, lot prices in Warehousing.

Reports

In various print sessions data can be selected across multiple companies. In the standard currency system, financial reports can only be printed across financial companies that have at least one common currency. If there is more than one common currency, choose in which common currency the report must be printed using the appropriate reporting currency group.

If no common currency exists, printing reports across multiple companies is not possible.

Logistical reports with currencies

The rate type to be used in translation to the reporting currency is also available in report sessions.

Rate determiner

In the standard currency system, the rate determiner is only used to switch to manually entered rates. All other functions of the rate determiner have been moved to the rate type. In transaction entry sessions, the Rate Determiner field will show Document Date by default. If you want to overwrite the defaulted rate, set the rate determiner to Manually Entered.

Finalization reports

Finalization reports must always be printed in the local currency of the company of the transactions concerned. As a result, if a batch for Company 100 contains transactions for Company 200, Company 200 transactions are printed on a separate report page in the local currency of Company 200.

Shared balances

In LN various balances are kept on the level of an entire group of companies, for example, business partner balances and credit limits. In the standard currency system, balances are also kept on company level in the company’s local currency. The group company balances are either kept in the reference currency, or in a user-definable currency. When these balances are recalculated, they are updated in the local currency. When the local currency is updated, the group balances are recalculated as well.