Introduction
Greg will learn the steps to revalue G/L accounts such as bank accounts recorded in a foreign currency. To create your financial statements, you must revalue foreign currency account balances and foreign currency G/L open items. These consist of transactions that are posted in a currency that is different from the local currency (which is EUR in our business scenario).
Since exchange rates can change daily, Greg will have to revalue the closing balance of a foreign currency G/L account at period-end. Any difference in the exchange rate will result in an adjustment posting to the G/L account balance to reflect the month-end revaluation.
In this example, during the current month a posting of USD 1000 was made, the equivalent local currency (company code currency) amount was EUR 1600 on the USD managed G/L account.
A few days later, a further posting of USD 2000 is made. Since the exchange rate has changed, the posting is made in the local currency (= Company Code Currency) with the amount of EUR 2800.
During foreign currency valuation at period end, the balance in foreign currency is valuated at the current exchange rate (1.3 in this example). This results in a valuated balance of EUR 3900. Compared to the cumulated total balance in local currency (EUR 4.400), there is now a foreign currency difference of EUR 500.
This valuation difference is posted as a loss adjustment in local currency on the Foreign Currency Balance Sheet Account and corresponding Profit & Loss Account automatically by the Foreign Currency Valuation Run.