Tips & best practices for currency

translation in SAP GL from Rohana

Gunawardena (transcript)
by Allison Martin
I recently moderated a web forum with on currency translation in SAP General Ledger with Rohana
Gunawardena of Quality Systems & Software. Rohana took questions on topics hell be covering at one of
his upcoming Financials 2012 session in Milan including group currency vs. company currency, adding
local currency codes, delta valuations to replace FC valuation functions, best practices for source currency
options,and other topics.
For the full Q&A, you can view the questions and Rohana's responses in the HR Forum, or read excerpts
from the transcript of the Q&A below.
NOTE Rohana will again be speaking at this year's Financials conference and will also take your
questions online in a pre-conference Q&A on Controlling in SAP ERP Financials. For more details, visit
our Financials Forum to join in.
Allison Martin (moderator): Thank you for joining us today! In this one-hour forum, we invite you to ask
your questions on currency translation with SAP.
Im very happy to have Rohana Gunawardena of Quality Systems & Software (QS&S) here to take your
questions today! Rohana is a speaker at SAPinsider Financials conferences, including this
yearsFinancials2012 conference in Milan this June. Hell be presenting a number of sessions including
one that deals with our topic today -- currency translation. (If you registered for todays Q&A, youve
received a download link to a portion of his presentation.)
Thanks to all of you who have already posted some advance questions! Rohana will be here for the next
hour, taking your questions, and will be jumping in shortly to respond to your posts.
Rohana Gunawardena: Allison, thanks for the introduction. I am glad to see there is so much interest in
this topic, with a lot of questions already entered. I will do my best to answer as many as possible in the
next hour.
Lauren Zhang: Our company code is live, but we didn't enable Group Currency. Now we want to enable
Group Currency. What are the things we could do, and have to be careful of?
Rohana Gunawardena: Lauren, thank you for the first question. The good news is that Group Currency
can be activated post go-live for company codes in New-GL and Classic-GL; howeve r, this is not an end
user process. It requires special conversion tools to enable Group Currency as data records need to be
populated for all historic GL transactions. I have personally worked on Group Currency conversions and
my company, QS&S, provides this specialist service including the conversion tools which we have built.
The conversion process is relatively quick for an SAP project with this level of impact. Remember, it hits
typically 12 16 weeks with on-site resources to help guide you through the project. The key aspect is the
testing of all financial processes to ensure there are no custom processes which have not been converted.
Typically, there are three test conversions: Sandbox, Dev, and QA, prior to the production conversion.

Pallavi Rastogi: FAGL_FC_TRANS posts based on a financial statement version into, usually, CTA
accounts setup to account for financial statement buckets. Is there a way for it to go back and post to the
source GL account instead of just acknowledging the source GL account in the text?
Rohana Gunawardena: Pallavi, great to get your question. The posting behavior you request can be
achieved for non-open item accounts through the application of an SAP Note. I have implemented this for
several clients and it works very well and simplifies config. and postings for end users. As with many SAP
notes, the description and instructions do not sound quite like what you may want, but it will do the
job. There will be quite a bit of config. change to achieve your end result after applying the note:
- SAP Note 1227385 -- FAGL_FC_TRANS: Using valuated account as adjustment account

Fariyal K: When the company code has more than one currency, one is Group Currency and the other is
Company Code Currency. At the time of Clearing transaction in the local currency system translates the
value in Group Currency, which creates a line item for the Exchange rate difference gain/loss account.
How can we avoid this?
Rohana Gunawardena: Generally, most US accounting departments like this functionality as it helps them
keep track of realized FX gains and losses. I would be most interested in understanding your accounting
departments requirement to eliminate this posting.
The automated posting to the Exchange rate difference account occurs as the document must balance Dr
& Cr postings in all currencies. As the original open item and the new clearing item are posted at different
dates, different exchange rates are picked up for the GC calculation, resulting in an imbalance. SAP posts
the difference to the Exchange rate difference account.
To eliminate the difference, you would have to manually enter the GC value for the clearing item at the
same time as the LC value -- instead of letting SAP calculate GC at the current rate -- so the GC value of
the clearing item matches the GC value of the open item. What you need to consider is if using a historic
exchange rate for an open item clearing posting is the correct accounting process. In most cases, I would
say this is not the correct accounting.
Consider a customer invoice with LC 100 GC 120. When the payment comes in 3 months later, the values
are LC 100 GC 110. Standard clearing would force GC 10 to the Exchange rate difference account.
Manually changing the cash posting to LC 100 GC 120 would get the desired result, but you have
overstated the cash account by GC 10. This will be corrected when you run translation at month end and
post to the CTA account. The process mentioned could be incorporated as part of a Z clearing program.
I would strongly advise mapping out the accounting on a spreadsheet and walking through it with your
Finance users so they fully understand the impact, e.g. valuation of cash, before proceeding with this type
of change.

Adriana Marturet: Is the valuation in each period closing for Bank GL accounts on foreign currency
registered on the same correction account (Local Account for Adjusting Receivables/Payables)?
The currency valuation of bank GL Account is reversed in each period closing. Is it considered difference
realized?
Rohana Gunawardena: Adriana, great to hear from you. When monthly valuation is run, there is a two
sided JV. One side will post back to the bank account or an offsetting adjustment account; the other side

posts to the CTA (Cumulative Translation Adjustment) account. Both sides of the JV can be controlled by
configuration. Depending on the configuration, these accounts may or may not be the same as the
adjustment accounts for receivables and payables. Even the CTA account can vary by source G/L
account.
Configure both posting accounts using IMG node Prepare Automatic Postings for Foreign Currency
Valuation (OBA1) -- will use key KDB or KDF depending on the config. approach you take. This applies for
valuation in New-GL and Classic-GL. (There are quite a few steps to the config. I cant list all of it here. I
went through this at SAP Financials 2012 Las Vegas but send me an e-mail if you want to go through
this with me.)
The term realized gain/loss is typically applied to gains/losses when an open item (receivable or payable)
is cleared, e.g. vendor payment i s made or customer payment is received. Generally I would not apply the
phrases realized/unrealized gain or loss to a cash account. In this case, I assume you are talking about a
foreign currency bank account, otherwise no valuation change relative to local currency, as this would be a
balance in foreign currency and not local currency. I would consider it unrealized. It is only realized on
conversion of the bank balance to local currency.

Gerry Rodrigues: We are about to add two additional local currencies to each company code and have
the following questions:
1) Is it mandatory that you have depreciation areas for each additional local currency? If so, when the
asset reconciliation accounts are translated at month end in ECC, will they not be out of balance with the
asset subledger depreciation areas for the additional local currencies?
2) What are the advantages of running month end translation in ECC (New GL) vs. only in the
consolidation tool e.g. EC-CS or BPC?
3) The New GL foreign currency revaluation process (FAGL_FC_VAL) does not allow posting of the
adjustment back to the original open item account. SAP notes 1227385, 1094379, and 884639 apply only
when you have one ledger. Do other customers have this requirement to post the FX reval adjustment
back to the original open item account? If so, what solutions are possible?
4) Does adding a third local currency e.g. type 40 or 50 extend the classic GL table GLT0 (which only has
transaction, local, and group currency fields) to include the third local currency, or is this currency stored in
a different table?
Rohana Gunawardena: Gerry, thank you for your questions. Do refer to my response to the first question
which talked about the special conversion tools required to activate additional local currencies post golive.
1) Yes you do need matching depreciation areas for each additional local currency. During the currency
activations I have been involved with, there have been no issues with out of balance depreciation
areas. Again, generating the depreciation areas requires custom tools as a straight copy will not create
asset history.
2) I recommend running translation in ECC over BI for the following reasons:
- Adjustments are closer to the source data so its easier to track any discrepancies
- Valuation and translation functionality is most developed in GL, so it allows the most flexibility
- Easier to include valuation and translation as part of the close cycle

- If valuation and translation are part of the close cycle, its easier to detect issues early on and the
pressure is on to clean up the data
- If valuation and translation are performed downstream, cleaning up any issues can be problematic as
end users have moved on to the next months issues
3) All customers I have worked with have used an offsetting account for translation posting back to an
open item account. At first, posting back to the open item account sounds like a good idea, but if you think
through the details, it will be a problem for end users, e.g. customer reconciliation account. They will need
to post entries per customer and will have many adjustment postings which may get printed on customer
statements or confuse AR clerks.
4) The classic G/L table GLT0 only has three currency buckets (by month) which cover document currency,
local currency 1, and local currency 2 (typically set up as Document/Transaction Currency, Local/Company
Code Currency and Group Currency). When you set up Local Currency 3 (e.g. Hard Currency) there is no
bucket left in GLt0 and the table cannot be modified. What is required is a new ledger using table GLT0,
using transaction OBS2 create ledger L2 with total table GLT0, define 2nd currency as Hard Currency or
other currency type you will store in LC3.
Do note for New-GL monthly balances are held in table FAGLFLEXT which already has 4 currency buckets
so it can accommodate LC3.
Vijayakumar Aluru: To Gerry Rodrigues' 3rd question: Chile has a statutory requirement to state
revaluated debtor and creditor balances and this was possible in R/3 4.7 version where we had the ability
to check "Balancesheet Valuation" and SAP did not reverse the FC valuation. But with ECC 6 its no longer
possible -- all FC valuations get reversed. How can we state revaluated balances?
Rohana Gunawardena: Vijay, thanks for the clarification. Now I know what the real question is.
SAP currently posts 100% valuation each month reversing prior month valuation. The option you mention
is called Delta valuation, where only one months delta is posted on each valuation run. Delta valuation is
an option in New-GL.
See SAP Notes:
1006684 FAGL_FC_VAL Delta Logic Enhancement
960661 - FAGL_FC_VAL Delta Logic Foreign Currency Valuation
SAP recognizes delta postings are a legal requirement in some countries. This configuration is not heavily
used and has a lot of notes. I would recommend heavy testing of multiple scenarios prior to go-live.
I have clients who operate in some countries (not Chile) that at first instance appear to require delta
postings; however, after working with their external auditors, they managed to get an exception from the
local regulator or foun d a legal workaround so they did not need to activate delta postings. This may be
something your users want to look at.
Vijayakumar Aluru: Group currency is USD. Funds are transferred from CAD to USD accounts at
different banks. Lets say CAD1000 was transferred at USD 1099 by different banks. When we account in
SAP, the exchange rate is different and auditors are stating our actual balance in bank in CAD & USD is
not the same as banks balances that we show in books. Its similar to physical cash, and SAP values
should be same as bank balances.
So we are manually entering these bank transfers in SAP with exact values as per bank statements in
CAD and USD. Is there a better way?

Rohana Gunawardena: This additional detail makes things clearer. I agree the USD and CAD should
match the bank statements. You do need to manually enter both the USD and CAD amounts in the JV
rather than let SAP calculate the other value.