Re: [sap-acct] Foreign Currency Valuation
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Posted by ramkumar_bala (SAP FI-CO) on Apr 16 at 12:26 AM | Mark as helpful |
Thanx Vidyadhar.
On Thu, Apr 15, 2010 at 7:04 PM, VidhyaDhar via sap-acct <
sap-acct@groups.ittoolbox.com> wrote:
>
>
> Hi Ramkumar
>
> The standard configuration relating to Foreign currency valuation is to
> post
> the exchange rate fluctuation difference to a gain / loss account and
> create
> a corresponding general liability in the General Ledger (known as Balance
> sheet adjustment account ). This is a statutory requirement for fair
> valuation of vendor payables and therefore it is generally sufficient to
> show it in your General Ledger ( without affecting line item balances ).
> That is the very reason behind showing a balance sheet adjustment account
> which reduces the overall payables ( from the vendor recconciliation
> account
> ) in order to arrive at a fair valuation of payables and account for
> exchange rate flucutations in the Profit and Loss Account.
>
> Exchange rates are time centric and hence very volatile. If you are
> executing periodic closing operations ( viz. on monthly basis or so ), then
> you would be affecting your vendor line items (open items) destructively
> every time. You would be adding to your woes which might even require an
> intra-account reconciliation process which is really cumbersome and
> avoidable. Moreover, actual valuation happens at the time of clearance of
> the open item as on the exchange rate prevailing then. Therefore, SAP
> thought that it would be better to account for the difference in valuation
> in a general ledger account which is grouped just below the vendor
> reconciliation account. Moreover, on a given day, two line items pertaining
> to the same foreign currency ( one cleared and one open ) could show
> different values.
>
> You must be aware that actual and permanent valuation happens at the time
> of *clearance of the open item* as on the exchange rate prevailing then.
> Therefore, SAP thought that it would be better to account for the
> difference
> in valuation in a general ledger account which is grouped just below the
> vendor reconciliation account.
>
> These are the reasons for showing the summary of exchange fluctuations
> generally in a balance sheet account which is of transient nature.
>
> However, if you prefer to do foreign currency valuation *with line item
> update*, I think you can capture the valuation difference in the line item
> as an additional piece of information. Yet accounting happens by affecting
> a
> common Balance Sheet Adjustment Account only.
>
> This is for your information, please
>
> Regards
>
> VidhyaDhar
>
>
>
> On Thu, Apr 15, 2010 at 5:10 PM, ramkumar_bala via sap-acct <
> sap-acct@groups.ittoolbox.com> wrote:
>
> > Posted by ramkumar_bala(SAP FI-CO)
> > on Apr 15 at 7:52 AM
> > Dear Colleagues,
> >
> > Our clients have purchases by way of imports which involves payment in
> > Foreign currency. (USD, Euro etc). When we do the forex valuation on the
> > closing date i.e., 31st March 2010 the posting goes to either gain/loss
> > depending on the valuation and the offsetting Dr/Cr goes to balance sheet
> > adjustment account. This is as per our configuration. However, our
> clients
> > wants the postings to be made in the Vendor account. As I see it this
> does
> > not appear to be a possibility.
> >
> > Can any of you provide me a solution/work around for this.
> >
> > --
> > Thanks & Regards,
> > Ramkumar B
> > Cell No:9845773994 (On roaming)
> > Cell No:9229152229 (Bhilai Local)
>
>
>
>
--
Thanks & Regards,
Ramkumar B
Cell No:9845773994 (On roaming)
Cell No:9229152229 (Bhilai Local)
__.____._ On Thu, Apr 15, 2010 at 7:04 PM, VidhyaDhar via sap-acct <
sap-acct@groups.ittoolbox.com> wrote:
>
>
> Hi Ramkumar
>
> The standard configuration relating to Foreign currency valuation is to
> post
> the exchange rate fluctuation difference to a gain / loss account and
> create
> a corresponding general liability in the General Ledger (known as Balance
> sheet adjustment account ). This is a statutory requirement for fair
> valuation of vendor payables and therefore it is generally sufficient to
> show it in your General Ledger ( without affecting line item balances ).
> That is the very reason behind showing a balance sheet adjustment account
> which reduces the overall payables ( from the vendor recconciliation
> account
> ) in order to arrive at a fair valuation of payables and account for
> exchange rate flucutations in the Profit and Loss Account.
>
> Exchange rates are time centric and hence very volatile. If you are
> executing periodic closing operations ( viz. on monthly basis or so ), then
> you would be affecting your vendor line items (open items) destructively
> every time. You would be adding to your woes which might even require an
> intra-account reconciliation process which is really cumbersome and
> avoidable. Moreover, actual valuation happens at the time of clearance of
> the open item as on the exchange rate prevailing then. Therefore, SAP
> thought that it would be better to account for the difference in valuation
> in a general ledger account which is grouped just below the vendor
> reconciliation account. Moreover, on a given day, two line items pertaining
> to the same foreign currency ( one cleared and one open ) could show
> different values.
>
> You must be aware that actual and permanent valuation happens at the time
> of *clearance of the open item* as on the exchange rate prevailing then.
> Therefore, SAP thought that it would be better to account for the
> difference
> in valuation in a general ledger account which is grouped just below the
> vendor reconciliation account.
>
> These are the reasons for showing the summary of exchange fluctuations
> generally in a balance sheet account which is of transient nature.
>
> However, if you prefer to do foreign currency valuation *with line item
> update*, I think you can capture the valuation difference in the line item
> as an additional piece of information. Yet accounting happens by affecting
> a
> common Balance Sheet Adjustment Account only.
>
> This is for your information, please
>
> Regards
>
> VidhyaDhar
>
>
>
> On Thu, Apr 15, 2010 at 5:10 PM, ramkumar_bala via sap-acct <
> sap-acct@groups.ittoolbox.com> wrote:
>
> > Posted by ramkumar_bala(SAP FI-CO)
> > on Apr 15 at 7:52 AM
> > Dear Colleagues,
> >
> > Our clients have purchases by way of imports which involves payment in
> > Foreign currency. (USD, Euro etc). When we do the forex valuation on the
> > closing date i.e., 31st March 2010 the posting goes to either gain/loss
> > depending on the valuation and the offsetting Dr/Cr goes to balance sheet
> > adjustment account. This is as per our configuration. However, our
> clients
> > wants the postings to be made in the Vendor account. As I see it this
> does
> > not appear to be a possibility.
> >
> > Can any of you provide me a solution/work around for this.
> >
> > --
> > Thanks & Regards,
> > Ramkumar B
> > Cell No:9845773994 (On roaming)
> > Cell No:9229152229 (Bhilai Local)
>
>
>
>
--
Thanks & Regards,
Ramkumar B
Cell No:9845773994 (On roaming)
Cell No:9229152229 (Bhilai Local)
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