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Cross Currency Clearing & FX Revaluation

Currently our GL validation is set up to allow cross currency clearing, so that a GBP balance could be cleared with a USD balance for example.

When this happens, the GL treats the transactions as closed items. However, when we run the FX revaluation, it revalues the USD balance as our FX revaluation runs on SL balances rather than GL balances, and the SL balance is treated as open still as it is not matched by attribute (i.e. different currencies).

Three questions follow from this:

1) Is it usual practice to perform cross currency clearing?

2) Should the USD balance be revaluing?

3) To clear this correctly should we be converting the GBP balance into USD before clearing? (Source system posts in GBP only although the cash is received in original currency).

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1 Answer

  • Best Answer
    Aug 24, 2007 at 11:49 AM

    > Currently our GL validation is set up to allow cross

    > currency clearing, so that a GBP balance could be

    > cleared with a USD balance for example.

    >

    > When this happens, the GL treats the transactions as

    > closed items. However, when we run the FX

    > revaluation, it revalues the USD balance as our FX

    > revaluation runs on SL balances rather than GL

    > balances, and the SL balance is treated as open still

    > as it is not matched by attribute (i.e. different

    > currencies).

    >

    > Three questions follow from this:

    >

    > 1) Is it usual practice to perform cross currency

    > clearing?

    >

    > 2) Should the USD balance be revaluing?

    >

    > 3) To clear this correctly should we be converting

    > the GBP balance into USD before clearing? (Source

    > system posts in GBP only although the cash is

    > received in original currency).

    Hi John,

    see also my post in your another related topic.

    TO answer these questions:

    1.

    Yes, cross-currency clearing is absolutely OK, as this is quite often normal business. Typical example is you have a vendor invoice in some funny foreign currency (say, HUF), and you transfer the money from your (physical) bank account which is kept in your local currency (say, GBP). Your bank will transfer in HUF, so your vendor in Hungary receives HUFs, but your bank statement will be in GBP. So you have to clear an invoice in HUF with a bank statement in GBP (regardless of the fact that the payment was really made in HUF).

    2.

    No, of course not. If the USD item is cleared, it should not be revaluated again. Easy o understand why: During the clearing (USD item is cleared with GBP item), realized FX differences were posted. Unlike (unrealized) FX revaluation, realized FX differences are not reversed on the next day, so if you revaluate (unrealized) your USD item again, you have a realized and an unrealized difference in your P/L statement for the very same item. Depending on the rates, one may be a loss and the other a gain, or any other combinations are applicable. This is certainly not correct.

    3.

    I do not undestand the process behind, so I cannot answer this reliable enough. But, from what I think to have understood from that, I think even if you would convert the GBP to USD (how???), it could happen that your converted USD amount is not the same as the original USD amount. Or, if your convert the (converted) USD amount back to GBP for your posting, it could happen that the GBP value of the original USD item and the (back-converted) GBP value of the second (originally GBP) item are different. So you may experince realized FX differences again, and then, my answer re point 2 above would apply again. - I may not have understood the process, so if you want to stop me speaking foolish pls. elaborate what exactly is happening here 😊)

    Hope that helps points welcome 😊

    Csaba

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    • Hi John,

      perhaps you know that for exactly this purpose (splitting unrealized FX postings based on FI-SL characeristics), SAP has a built-in feauture in SAPF100. This is pushbutton "SL Extra" on the GL balances tab of SAPF100s selection screen. Pls. check out the field documentation F1-help below and consult OSS note 949971 which is describing your options quite comprehensive.

      <i>Read Balances from Special Purpose Ledger

      Setting this indicator means that the transaction figures from a special

      purpose ledger are used and not the transaction figures from the general

      ledger.

      Use

      You can therefore specifically valuate additional dimensions such as the

      functional area or profit center within an account.

      The expense/revenue is determined in accordance with the additional

      dimensions of the ledger. A profit/loss therefore arises per functional

      area, for example.

      During posting the data from the additional dimensions is entered in

      batch input fields.

      </i>

      =====

      Unfortunately, you cannot flag the open items in FI-SL. This is because a particular line item is transferred ONCE to FI-SL. Any changes made to the line item later in FI, say, changing the Text field or just clear the item are NOT transferred to FI-SL again, so the active connection is lost, only the references are there, but no any updates take place.

      So in case you want to consider if the item was cleared meanwhile, you have no chance to decide it based on the FI-SL information as that will be unchanged since the line item was transferred to FI-SL. How to check if the item is cleared can be done via checking BSAS or you can also check directly in BSEG. (fields AUGDT, AUGBL are initial? Then it is still open). Lucky enough, if you have read the FI-SL line item, you can find the BSAS (or BSEG) record quite straightforward. It would not make your report quicker, but it could be much worse. All database selections can be assessed using primary keys so a selection is as performant as possible.

      ===

      Hm, reversing and reposting an entry just because of this seems to be an extremely basic solution to me. What is the relation between the GBP values of the original (USD) item and the new (GBP) item? Which way the new GBP items are posted? Is it an interface? Is it some standard or custom report within SAP? Is it a manual journal entry? As mentioned above, cross-currency clearings are not at all an issue form an accounting point of view - of course it would be ideal if the currencies would be the same but no one can be blamed if they are not. (One should know the process behind to judge it, however).

      Hope that helps, points welcome 😊

      Csaba