Update Type DBT_B008: Forex Loss (planned outflow)

[Former Member]

Hi Treasury experts.

My client has recently upgraded from 4.6C to ECC6. They used a Treasury consultant for the upgrade, but he is now unavailable, so they have asked me (FI-CO consultant, with no treasury background) to look at some issues they are having with paostings from treasury. I've managed to fix some account assignment issues but I am a bit stuck on the following one:

The client has a loan in a foreign currency, which has been in place for a number of years. It moves up and down regularly. Each month, they run transaction TBB1. A Forex Loss (in Local Currency) is regularly posted, via Update Type DBT_B008. I imagine that, given different exchange rate movements, DBT_B006 would also post a gain, if appropriate, but that has not occurred since the upgrade.

A typical example is that a Borrowing Decrease (update type MM1110) of NZD2,000,000 gave rise to a Forex Loss (DBT_B008) of AUD73,000. I am trying to understand a couple of things:

1. What is the purpose of the DBT_B008 posting and how is the loss calculated? I imagine that it is based on the current exchange rate, at the time of the transaction, compared with the average exchange rate embodied in the account balance, that has accumulated over a number of years. Is this correct? I have attempted to verify this calculation externally but have not been successful.

2. The G/L account for the Loan is an open-item-managed account. Each time there is a movement up or down in the G/L account (representing a borrowing increase or decrease), that movement is manually cleared against the balance in the account, leaving a residual. This clearing transaction also creates exchange gain/loss postings in the Local currency. If we already have G/L transactions flowing from DBT_B008/DBT_B006 update types, is this double-counting?

Thanks in advance for your advice,

Marc Huggins

[former_member566828 · Accepted solution]

Hi Marc,

#1. the purpose of number of so called Derived Business Transactions (Update types, usually starting with DBT_XXXX) is to post some non-cash flows or valuation flows resulting from a specific transaction. E.g. let's say your company code currency is EUR, you take a loan of 130 USD, when rate is 1.30 USD to EUR, so local currency amount is EUR 100 and return the same USD amount, however at a new rate is e.g. 1.50, so you local amount is EUR 86.67 - therefore you book EUR 13.33 as an FX profit. this is a very simplified example - it depends also on so called Position management procedure, assigned for that instrument;

#2. I don't think that the G/L account for the Loan position of is an open-item-managed account. Also, there are dedicated transactions in Treasury module, so you don't need to do manual things/ reconciliations in order to calculate and post these Derived flows, e.g. you use TPM1 to execute valuation at the End of Period or TPM18 to post realized gain/ loss.

Kind regards,

Renatas

[Former Member · Accepted solution]

Thanks for your reply Renatas, it makes things clearer.

The G/L account for the loan, historically, has been set up as open-item-managed. Perhaps it should not have been because, as you say, the Tresury module is automating the postings. I may suggest to them that they change this setting

This issue has now been re-assigned to my client's Global help-desk, wher they have some Treasury consultants, so hopefully they will be able to resolve the issue.

Thanks for your assistance.

Marc

[former_member566828 · Accepted solution]

welcome