currency translation, valuation and coversion

[Former Member]

Hi Experts,

Please let me know what is the diffrence between valuation, translation and conversion of currencies and how can it be done?

regards

kumar

[Former Member · Accepted solution]

Dear Kumar,

In IMG under

SAP Netweaver -> General Settings -> Currencies

-> Check Exchange Rate Types

Exchange rates for different purposes for the same date are defined in the system as exchange rate types.

If you need to carry out currency translations between a number of different currencies, you can simplify exchange rate maintenance by entering a base currency for the exchange rate type. Instead of entering translation rates between every single currency, you then only need specify the translation rate between each currency and the base currency. All currency translations then take place in two steps - into the base currency and from the base currency into the target currency.

The base currency is DEM. You want to translate FRF to CHF. To do this, the following entries must be made in the table for maintaining currency translation rates:
o Ratio for FRF -> DEM
o Ratio for CHF -> DEM

Translation from FRF to CHF is then carried out automatically. The translation is done as though this exchange rate (FRF -> CHF) was actually entered in the conversion table.

In this example, the base currency (DEM) is the To-currency and FRF or CHF the From-currency.

For exchange rate relations within the EU, it is a legal requirement that the base currency (EUR) is the From-currency. You set the indicator for this in the BCurr=from field.

SAP Netweaver -> General Settings -> Currencies
-> Enter Exchange Rates

Exchange rates are required to:

• Translate foreign currency amounts when posting or clearing or to check an exchange rate entered manually

• Determine the gain and loss from exchange rate differences

• Evaluate open items in foreign currency and the foreign currency balance sheet accounts

The exchange rates are defined by period ("valid from").

The function has been improved. Choose the activity Define Exchange Rate Input Worklist or Assign Exchange Rate to Worklist.

The system uses the type M exchange rates for foreign currency translation when posting and clearing documents in the activity Enter Exchange Rate. An entry must exist in the system for this exchange rate type. The exchange rates apply to all company codes.

The exchange rate relations for currency conversion are only displayed here. Read the chapter Define Translation Ratios for information about exchange rate relations maintenance.

You define:

• the rate types under which you want to store your exchange rates in the step

"Check Exchange Rate Type"

• the required currency keys in the step "Check Currency Codes"

• the conversion factors for

- the currency pair

- the exchange rate type

- the date

in the step "Define the Conversion Factors for Currency Conversion"

<a href="http://help.sap.com/saphelp_erp2004/helpdata/en/a6/004940f0030272e10000000a155106/content.htm"><b>Currency Valuation:</b></a> - To create your financial statements, you have to perform a foreign currency valuation. This valuation covers the following accounts and items:

· Foreign currency balance sheet accounts, that is, the G/L accounts that you run in foreign currency.

The balances of the G/L accounts that are not managed on an open item basis are valuated in foreign currency.

· Open items that were posted in foreign currency.

Open items that are open on the key date are valuated in foreign currency.

You have the following options for the foreign currency valuation:

· You can perform the valuation in local currency, (company code currency), or a parallel currency (for example, group currency).

· You can also use different valuation methods (for example, lowest value principle).

· If you want to translate additional currencies from the local currency, foreign currency valuation automatically performs a currency translation.

Regards,

Naveen.

[Former Member]

Hi,

Currency translation is translating one currency to another currency. For example if the Company Code currency is USD and it procures materials from Canada whose currency is CAD. While accounting the transaction in USA Company code, the transaction currency is CAD. However, it will also record in local currency USD. The CAD value will be translated into USD at the conversion rate prevailing at that time. Translation and conversion are quite similar.

Valuation is evaluating the value at the month end or year end. For example if a foreign currency purchases are made on Jul 01st and they are recorded in books of account at the rate prevailing on that day. Assuming a credit period of 120 days, the payables will be outstanding on Sep 30th. Between Jul and Sep the conversion rate would have changed (either increase / decrease). Hence, when valuating the open receivables on Sep 30th the payables are to be valuated for change in the currency exchange rate.

Thanks

Murali.