| # Currency differences accounts Currency differences can make the financial analysis and reconciliation more complex. These types of currency differences can occur: Currency differences Currency result caused by fluctuations in the exchange rate, for example, if the rate differs between the invoice date and the payment date. Exchange gain and loss Currency result caused by the use of different exchange rate types, for example, the Sales rate type and the Internal rate type, or if by means of the rate determiner you have changed the exchange rate for a transaction during the order handling procedure. Translation gain and loss Currency result caused by the use of different currencies during the order handling procedure, for example, if the order currency or the payment currency differs from the invoice currency. Destination gain and loss Currency result caused by different results when the transaction currency is converted to the various home currencies. Destination gain and loss can only occur in an independent currency system. To support good reconciliation possibilities, currency differences and exchange gain and loss are posted to these accounts: Exchange Gain and Loss For differences between related amounts (debit and credit postings) due to different exchange rate types or different currency rates. Currency Translation For transactions of which the debit posting and the credit posting are made in different currencies. Currency Differences contra account For currency differences on the invoice accrual account due to rate changes between the receipt date and the approval date of the invoice and calculated when you close a financial period. Exchange Gain and Loss account Differences between related amounts due to different exchange rate types or different currency rates are posted to an Exchange Gain and Loss account. The exchange gain and loss is calculated at the time when you post the integration transactions to the General Ledger. The difference amounts are posted to the statutory account that you can select for each company or currency: For a company, in the Statutory Exchange Gain/Loss Account field on the Destination Gain/Loss tab of the Company Parameters (tfgld0503m000) session. For a currency, in the Statutory Exchange Gain/Loss Account field of the Additional Currency Features (tfgld0129m000) session. Example of Exchange Gain and Loss To a purchase order, this data applies: Purchase order amount: 100 USD Local currency: EUR Internal exchange rate: 1 USD = 0.937012 EUR Purchase exchange rate: 1 USD = 0.936344 EUR This results in these postings for the Purchase Order/Receipt transaction:
Type | Account | Amount (Debit) | Amount (Credit)
--- | --- | --- | ---
Debit | Interim Transit | 93.70 EUR | -
Credit | Invoice Accrual | - | 93.63 EUR
Credit | Exchange Gain and Loss | - | 0.07 EUR
Currency Translation account Related amounts in different currencies are posted to a Currency Translation account. Every transaction in different currencies on the Invoice Accrual account has a one-to-one relationship to a transaction on the Currency Translation account. For example, if a sales order amount is expressed in USD and the invoice currency is CAD, the sales order amount and the invoice amount are posted to the Currency Translation account. When you approve the invoice, the invoice amount is converted to the order currency with the currency rate of the invoice date and time. If the calculated order amount differs from the original order amount, these rules apply: If the difference is due to currency rate changes between the order date and the invoice date, the difference is posted according to the mapping defined for the Currency Differences integration document type. If no currency rate changes occurred, the difference amounts are posted according to the mapping defined for the Purchase Order/Price Variance integration document type, using the Currency Translation account as an interim account. You can select the Currency Translation accounts and dimensions for the financial company in the Company Parameters (tfgld0503m000) session. For the Currency Translation accounts, do not set the Currency Analysis field to Required, Calculate Currency Diff. in the Chart of Accounts (tfgld0508m000) session. Example of currency translation The order currency of a purchase order is USD and the invoice currency is CAD. For the integration transactions, these postings are made:
Event | Type | Account | Currency
--- | --- | --- | ---
Receipt | Debit | Inventory | Local currency converted from USD, with order rate.
Receipt | Credit | Invoice Accrual | USD
Invoice registration | Debit | Registered Invoices | CAD
Invoice registration | Credit | ACP Control Account | CAD
Invoice approval | Debit | Invoice Accrual | USD, converted from CAD, with invoice rate.
Invoice approval | Credit | Registered Invoices | USD
Payment | Debit | Currency translation | CAD
Payment | Credit | Currency translation | CAD
Payment | Debit | ACP Control Account | CAD
Payment | Credit | Bank account | CAD
Currency Differences contra account Currency differences are calculated and posted to a Currency Differences contra account. For every Operations Management transaction (for every reconciliation area), ERP Enterprise provides a separate integration document type for the mapping of the currency differences. The transaction type used to post the currency differences must be of the Journal Vouchers category. All postings on the Invoice Accrual account are made in the transaction currencies. Therefore, if you run the Calculate Currency Differences (tfgld5201m000) session when you close a financial period, these transactions are included in the process. Differences between the receipt amount and the invoice amount due to rate changes between the receipt date and the approval date of the invoice are posted to a separate contra account for currency differences on the invoice accrual. These rules apply to the Currency Differences contra accounts: A unique contra account is linked to each ledger account on which the transaction currency can be different from the home currencies. When you create such a ledger account, for example, a WIP account or a cash account, you must define the Currency Differences contra account for the ledger account. The Currency Differences contra account must have the same parent account as the account to which it is linked. The Currency Differences contra account must be a Statutory account of the Balance Sheet type. As the account is a control account, you cannot create manual transactions on the account. In the Chart of Accounts (tfgld0508m000) session, on the Dimensions tab, the settings of the Currency Differences contra account must match the corresponding settings of the newly created ledger account to which it is linked. If they do not match, ERP Enterprise will prompt you to make the settings match. Provided that the Integration Account check box is unavailable, the same (new) account can be used as contra account as well. In that case, the dimension options can be selected as required. Some examples of accounts that require a Currency Differences contra account are: From the integrations: WIP accounts and GDNI accounts. Internally in Financials: bank accounts, cash accounts, and so on. Related topics Reconciliation - overview Currency differences Integration document types - Currency Difference The reconciliation process |