Revaluating Advanced Foreign Currency

As part of period-end closing, when preparing financial statements, accounting conventions require that the foreign currency revaluation should be performed to present the true value of foreign currency open items and foreign currency assets/liabilities at the closing date in presentation currency. This re-measurement considers the changing value of payables/receivables/assets due to varying exchange rates between currencies. The valuation process generates the valuation difference postings to reflect the valuated account balances in presentation currency and the related effect on the financial results. 

The Advanced Foreign Currency Valuation is used for the valuation of foreign currency transactions considering the exchange rate of the currency of the transaction (document currency) and the functional currency of the entity at the reporting date. The adjustments are posted as exchange rate differences. Next to the valuation of the functional currency, postings include exchange rate differences for all currencies maintained for the entity.

The applicable international accounting standards for Advanced Foreign Currency Valuation are:

• US-GAAP: SFAS 52, FIN 37, EITF 01-5
• IFRS: IAS 21, IAS 29, IFRIC22

Some of the main characteristics and functionality of the Advanced Foreign Currency (as well as the Advanced Valuation Runs are as follows;

Advanced Foreign Currency Valuation only uses the delta posting logic. Thus, only the difference (delta) of the new evaluated amount and the total of the original amount and previous adjustments will be posted.

After a run, a result list will be created. This contains all the relevant information for those items that have been handled successfully as well as for those that have not handled successfully. For the successful items, you can see a green status flag, the valuation journal entry created during the run as well as the reason for the posting. This reason can be found in the column with the header ‘Valuation Line Type’. For the erroneous items, the root cause can be found in the column ‘Status’. 

Schedule General Ledger Jobs: Advanced Foreign Currency Valuation template.

You use this job template to carry out the advanced foreign currency valuation for the creation of your financial statements. By using different valuation rules, foreign currency valuation can be performed in the functional currency. It is performed in the local currency if you haven't set up the functional currency for your company code. 

You only have to set up profit and loss (P&L) G/L accounts. You don't need any reconciliation accounts for your Balance Sheet accounts as postings are always made to the account to be valuated and are made directly to the reconciliation accounts. 

Advanced foreign currency valuation includes the following functions:

• Selection of the items relevant for valuation
• Determination of open items and balances
• Valuation of open items and balances
• Posting of valuation differences

• Advanced Foreign Currency Valuation uses the delta posting logic only. In the Classic Foreign Currency Valuations, the reversal posting logic is maintained as the default solution, but customers can request via WCR (Worldwide Customer Requests) the delta posting logic. For some specific countries delta posting logic is the default for Classic Foreign Currency Valuation.
• The Advanced Foreign Currency Valuation (as well as the other Advanced Valuation Runs) are posting onto the valuated accounts (e.g. initial reconciliation accounts) instead of the adjustment accounts in the Classic Foreign Currency Valuation. 
• Whereas in Classic Foreign Currency Valuation, the valuation was done for the configured currency type (and dependent currency types), the Advanced Foreign Currency Valuation always valuate in the Functional Currency but remeasures all the others. 
• In all Advanced Valuation Runs, the valuation area is not used anymore. The accounting principle will be used instead. 
• Classic Foreign Currency Valuation could post to several ledgers via a ledger group. Advanced Foreign Currency Valuation posts to one ledger only. 
• The selection screen for Advanced Foreign Currency Valuation was restructured and the screen is now leaner. In addition to the company code and ledger, the valuation key date needs to be maintained. The Advanced Foreign Currency Valuation Run can be either executed in test run or in update run. 
• While making the selection screen leaner, the respective configuration activity was empowered. In the configuration, on a valuation rule-based approach the necessary configurations, like tagging of the accounts and the accounts the automatic postings shall be made onto need to be maintained.