Paloma knows the Bike Company has a group currency defined in the system that saves all values in the same currency. She looks into the currency type logic and settings in SAP S/4HANA and notes the following:
Different currency types allow for precise financial reporting in various currencies, ensuring that financial statements are accurate and compliant with local and international accounting standards.
In a modern SAP S/4HANA system the architecture that supports the currency concept is as follows:
- Universal Parallel Accounting (UPA): Allows businesses to maintain multiple ledgers, each following different accounting principles or standards, ensuring compliance and providing flexibility in financial reporting.
- Real-Time Currency Conversion: Ensures that financial data is converted to the relevant currency at the time of posting, providing up-to-date and accurate reporting.
- Multiple Currencies: UPA supports multiple currencies per ledger, allowing for comprehensive reporting and analysis.
There are generally two types of currency requirements:
- Externally-Specified: These are specific to business transactions, such as amounts on invoices. They include document, transaction, and item currencies.
- Business-Use: These can be translated based on settings like exchange rates and books, and managed alongside original currencies.
In addition to managing your ledgers in the company code currency and global company currency, you have the option to manage up to eight additional currency types (per ledger). Some are pre-configured for example, hard currency, index-based currency, or global company currency, but you can also configure currency types yourself (in namespaces Y* to Z*).
Uses of Parallel Managed Currencies:
- Individual financial statements in company code currency
- Consolidated financial statements
- Regional statements from consolidation groups
- Reporting with hard or index-based currency for high inflation countries
- Reporting with functional currencies in specific industries (such as oil and gas)
- Reporting with different exchange rates (like in constant rates)
- Reporting views for transfer prices
The actual currency code (such as USD or EUR) and the translation method (for example, at the current central bank exchange rate) are assigned to the currency types. For each currency type, you define information such as the exchange rate type, due date, and source currency from which to be translated.
You can define different exchange rate types for different purposes, such as valuation, conversion, translation, and planning.
Some examples of exchange rate types are:
M – Standard translation at average rate
B – Standard translation at bank selling rate
G – Standard translation at bank buying rate
P – Standard translation for cost planning
You can then maintain the exchange rate for a currency type and a combination of two currencies.