Translating Currencies

Objectives

After completing this lesson, you will be able to:

  • Translate values from one currency to another

Exchange Rates

To translate values from local to group currency, group reporting uses exchange rates from the same transaction currency tables that accounting uses. For example, the M exchange rate type is utilized in accounting while in group reporting, AVG and CLO are typically used.

In the Period Preparation SAP Fiori group, you can:

  1. Maintain/display exchange rates.
  2. Import exchange rates.

Currency Exchange Rates App: With this app, you maintain exchange rates in the exchange rate table for combinations of exchange rate type, source and target currency, and date.

The following preset exchange rate types are provided with group reporting:

  • AVG: Monthly average rate for consolidation
  • AVG1: Monthly average rate for budget consolidation
  • AVG2: Average rate for consolidation simulation
  • CLO: Monthly closing rate for consolidation
  • CLO1: Monthly closing rate for budget consolidation
  • CLO2: Closing rate for consolidation simulation

View Exchange Rates

Business Scenario

The companies in your corporation have submitted trial balances in their local currencies. To translate the local currency values into group currency values, you need to confirm the exchange rates.

What skills will you develop in this practice exercise?

View existing exchange rates.

Run Currency Translation

You run currency translation from the data monitor. Currency is translated based on the currency method assigned to each consolidation unit.

You can display the values and rates used for the calculations in the log:

  1. Currency Translation Key determines whether the periodic or YTD calculation is used.
  2. Exchange Rate: The AVG exchange rate is used for movements and the CLO exchange rate is used for opening balance.
  3. Reference Exchange Rate: The reference exchange rate is used to calculate currency translation differences.
Note
You can right-click on a column in the log such as FS Item and choose the Group option to create subtotals. One or more columns can be grouped.
Note

CT = currency translation key. This is determined in the currency translation method. The following list are the keys that are used the most:

  • 1 – Translation of cumulative local values at the exchange rate for the current period
  • 5 – Translation of each period at applicable rate for the period
  • 6 – No re-translation of existing group currency value

You run currency translation to translate the currency of financial statements from the local currency (LC) into the group currency (GC) so that the financial statements from local companies can be included in the group results.

In reporting, you can easily view the data before and after currency translation by displaying the local and group currency values. Also, it's useful to add sub item to the report to display the currency translation adjustment in sub item 980.

It’s important to display subitems in currency-related reports because the translation varies for opening balance vs. changes and so forth.

When you translate income statement items such as revenue, the average exchange rate is used to determine the group currency value. The currency translation adjustment is then posted to a separate FS item and subitem.

Let's look at a practical example of a revenue currency translation.

In the following image:

  1. The Revenue LC amount is -725.000 for the period movement (subitem 915)
  2. The average exchange rate is .80
  3. The reference exchange rate is .86
  4. The translation difference is -43500 (-623.500 + 5800.00)
  5. The Group Currency Amount is -623.500 = -725.000 x .86

In reporting, the currency translation adjustment of -43.500 includes -21.958.

Use Group Currency Without Re-translation

At ABC Corporation, you want to use existing group currency values without re-translation. You can assign a translation method to the consolidation unit that is configured to not re-translate existing group currency values. In the next example, consolidation unit US## is configured to not re-translate existing group currency values.

In the following image:

  1. The Translation Key is 6: No re-translation of existing group currency values.
  2. The Translation Difference is zero.
  3. The Reference Exchange Rate is 1.
  4. The Reference Exchange Rate Indicator is *: Reference value = group value.

In the preceding image, the opening balance group currency value of 1.248.000 was imported from a file. As you can see in the log, the value of 1.248.000 is unchanged.

Multiple Group Currencies

In some business scenarios, it may be required to record values in multiple group currencies. All group currencies can be translated in parallel.

In the preceding image, group currency values for the Canadian subsidiary are displayed on EUR as well as USD. To do this, version is added to the columns. Version U## is using the EUR group currency while the V## version is using the USD group currency.

Run Currency Translation and Report on the Results

Business Scenario

Now that you’ve confirmed the exchange rates, you need to run currency translation and report on the results.

What skills will you develop in this practice exercise?

  • Run currency translation.
  • Report on the translated results.
  • Report on multiple group currencies.

Task 1: Run Currency Translation

Task 2: Report on the Translated Results

Task 3: Report on Multiple Group Currencies

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