Posting realized and unrealized exchange differences

Identifying the Exchange Difference Accounts

You can define separate exchange difference accounts for realized and unrealized differences. You can also post gains and losses to different accounts, if required.

You can define the exchange difference accounts at two different levels:

• by currency using Currency Codes (CNC)
• by currency rate using Currency Period Rates (CNP) or Currency Daily Rates (CND).

The accounts you define for a period or daily rate, override the accounts you define for the currency as a whole. Alternatively, you can leave these fields blank and enter the exchange difference accounts at run time.

Realized Gains and Losses

Realized gains and losses may be generated when you allocate or match transactions in the transaction currency. A gain or loss occurs if a different exchange rate is used on the matched transactions causing a difference in the base currency and second base or reporting currency.

The realized gain or loss is the difference between the base currency amounts, or second base/reporting currency amounts, on these matching transactions.

You can define the following two different realized exchange difference accounts, at both the currency rate and currency code levels:

• Realized Net Losses Account - this is the account code to which any net realized amounts, or realized losses that are calculated using the currency period or daily rate, or currency, are posted.
• Realized Gains account - this is the account code to which any realized gains calculated using the currency period or daily rate, or currency, are posted.

If you do not define a Realized Gains account, then all realized amounts are posted to the Realized Net or Losses account.

If these payments subsequently clear the bank account at a different rate, you can use the Reconciliation Manager or one of matching facilities to calculate and post any realized exchange difference.

Unrealized Gains and Losses

Unrealized gains and losses are calculated by Ledger Revaluation (LER). They can be calculated periodically to record an 'anticipated' gain or loss as a result of currency fluctuations.

You can define the following two different unrealized exchange difference accounts, at both the currency period rate and currency code levels:

• Unrealized Net/Losses account - this is the account code to which any net unrealized amounts, or unrealized losses that are calculated using the period currency rate, or currency, are posted. Whether the net values, or losses only, are posted to this account, depends on the setting in Exchange Gain/Loss Post Rule in Ledger Setup (LES) as described below.
• Unrealized Gains Account - this is the account code to which any unrealized gains that are calculated using the period currency rate, or currency, are posted.

You can also override these accounts at both levels and enter the accounts when you run Ledger Revaluation.

Exchange Gain/Loss Post Rule

The Exchange Gain/Loss Post Rule in Ledger Setup determines how revaluation losses and gains are posted. Four options are available:

• Net Gains and Losses - this posts the net gain or loss to a single currency difference account.
• Gains Only - this posts gains only, to a single account.
• Losses Only - this posts losses only, to a single account.
• Gains and Losses Separately - this posts both gains and losses to separate accounts.