Foreign Currency Revaluation in SAP: Month End Closing

Before creating Financial Statements, we have to perform Foreign

Currency Valuation for the Transaction done in Foreign Currency.

These transactions can be bills receivables or bills payable or might

be intercompany money transfers which involves G/L Accounts,
Customer or Vendor.

The Line items can be open or cleared.

For the Line items which are cleared the exchange rate would be
that of the date on which it is cleared.

For Open Items which are not yet cleared the exchange rate may
be considered as the current rate or can be considered as month
end exchange rate and can be carried out as a monthly closing
activity.

So at the year end, there could be some revenue or expense due

to exchange rate fluctuations which will be reflected in the
Financial Statements.

Expense and Revenue Accounts for exchange Rate differences can

be maintained in Customizing transaction code SPRO. In the SAP
we can carry out Foreign Currency Revaluation in the following
manner:
Valuation is required for the following scenarios:

 Non-open item managed balance sheet account balances,

where the account currency is not the local currency
 Open items, including vendor and customer, posted in a
foreign currency

When an SAP foreign currency valuation is done, all open items

and balances in foreign currency will be converted to local currency
using the current exchange rate maintained in the system.
Therefore, the valuation must be done at the time of closing so
the correct exchange rate is used. When open items and balances
posted in foreign currency are valuated, the foreign currency
program generates a document. It also automatically creates a
reversal document with a posting date of the FIRST DAY OF THE
NEXT PERIOD.

For non-open item managed accounts, the valuation adjustment

posts directly to the account itself. For open item managed
accounts, since it is not possible to post directly to a
reconciliation account for payables or receivables, the valuation is
posted to an adjustment account. This is a special account that
must be created for this purpose.

The accounting entry for open item managed (OIM) accounts is as

follows:

Dr/Cr Unrealized exchange gain/loss account

Cr/Dr GL account being valuated

The accounting entry for open item managed accounts is as
follows:

Dr/Cr Unrealized exchange gain/loss account

Cr/Dr Balance sheet adjustment account

Step 1) Enter Transaction Code F.05 in the SAP Command Field

Step 2) In the next screen, Enter the Following

1. Enter Company Code for which Foreign Currency Valuation is

to be carried out
2. Enter Evaluation Key Date
3. Enter Valuation Method for Exchange Rate Consideration
4. Enter Valuation in Currency Type ( Default is 10 : Company
Code  Currency)
5. You can filter out Valuation activity by entering appropriate
parameters in the Open Items Tab Screens.

Press Execute
Step 3) In the next screen, a list of G/L Accounts is generated
which are selected for the Foreign Currency Valuation by the
Report SAPF100. It evaluates the open items in foreign currency
as well as foreign currency balance sheet accounts.