Hi All,
I wanted to know "How SAP works on Foreign Currency Translation at year end" from Local Currency to Group Currency for P&L Items.
I know how SAP works for Balance sheet items but am really confused with when the translation was done for P&L Items.
Configuration:
We are on ECC 6.0 . Local Currency is CAD and we have 2nd Local Currency as "USD - Group Curr".
We have set up Valuation Method - 4
We have set up Valuation Area - 40
For Account Determination for Currency Translation, GL accounts (Loss, Gain and B/S Adj) were setup for the combination of Chart of Accounts, Val Area and Fin Stmt Ver.
Sales Account Balance
CAD (LC) USD (2nd LC)
1000 920
Using tcode "FAGL_FC_TRANS", we translated our P&L items.
Local Currency is CAD and Group Currency is USD.
CAD 1000 and USD 920 are cumulative balances over a period of time.
Since at the end of year CAD became stronger, exchange rate is 1.11 as an example
Sales Account Balance
CAD (LC) USD (2nd LC) Translated Value in USD
1000 920 900
System passed the following entry in USD:
Debit Balance Sheet Adj A/c 20
Credit Translation Gain / Loss A/c 20
Here are the questions:
1. How does over all translation work? - Should we get any Gain / Loss and have an effect on P&L when all accounts (P&L, B/S) are translated?
2. How can there be a gain entry when USD value has really fallen from 920 to 900 in the current case.
Thanks for your time.
Vijay