In the FI Customizing ('Financial Accounting -> Financial Accounting Global Settings -> Company Code -> Multiple Currencies -> Define Additional Local Currencies'), you have the option to update documents and account balances in up to two further currencies in addition to the local currency of the company code.
If you specify the 2nd and 3rd local currency, you have to specify whether this should be calculated from the transaction currency directly or from the 1st local currency. Depending on for which purpose you plan to use the 2nd and 3rd local currency, you use one of these methods.The 2nd and 3rd local currencies in the current FI can express a combination of currency and "valuation", where in this context, the valuation is the perspective from which you can look at a business transaction.This can be a company code, group or profit center.The characteristic perspective allows you to look at a business transaction from the profit center, company code or group view without considering internal business volume and intercompany profits.
A translation from the transaction currency is useful if the update should take place in an index or a hard currency.You want to display the business transactions from the original view (from the business transaction) in a different currency, usually because a specification country currency is pointless due to high inflation.
Example:a Brazilian company, that manages the US dollar as a hard currency, has an incoming invoice of more than 1000 USD.The invoice is posted with a manual exchange rate of 1,834. The 2nd local currency is calculated with exchange rate type M from the transaction currency.Since the transaction currency and the 2nd local currency are identical, the amounts must be identical:
TC 1st LC 2nd LC
USD BRL USD
-1.000,00 -1.834,00 -1.000,00
On the other hand, the translation of the 1st local currency is useful, if the purpose of the update in parallel currencies consists of consolidating several company codes into one group.Many accounting principles require that you should always use the local currency (named GAAP functional currency in the U.S.)of the company code to be consolidated as a basis when you consolidate transactions in foreign currency. The 2nd local currency displays the documents in the reporting currency of the group (group currency). Here we no longer exclusively have to consider the company code view but also have to consider the group perspective.Consequently, when the transaction currency and the 2nd company code are the same, different amounts may result.This seems illogical from the perspective of the company code but it makes sense when you consider that the 2nd local currency does not display the perspective of the company code, but rather the translation of the business transaction from a group view, however, "only" the currency translation.
Example:the French subsidiary of a US group with a 1st local currency in EUR and a 2nd local currency in USD has an incoming invoice of more than 1000 USD. The invoice is posted with a manual exchange rate of 1,10. The 2nd local currency is determined with the exchange rate type M from the 1st local currency to the exchange rate of 1,15. The following values result for the payable:
TC 1st LC 2nd LC
USD EUR USD
-1.000,00 -1.100,00 -956,52
In this case, the difference between the USD amounts is justified, since the group translates from EUR using a fixed rule. What the original currency or exchange rate was is of no importance. The amount in the 2nd local currency is not consistent with the original business transaction, since the translation from the 1st local currency displaysa second business transaction with a user-defined logic for the group. This is this first step towards consolidation.
If you specify the 2nd and 3rd local currency, you have to specify whether this should be calculated from the transaction currency directly or from the 1st local currency. Depending on for which purpose you plan to use the 2nd and 3rd local currency, you use one of these methods.The 2nd and 3rd local currencies in the current FI can express a combination of currency and "valuation", where in this context, the valuation is the perspective from which you can look at a business transaction.This can be a company code, group or profit center.The characteristic perspective allows you to look at a business transaction from the profit center, company code or group view without considering internal business volume and intercompany profits.
A translation from the transaction currency is useful if the update should take place in an index or a hard currency.You want to display the business transactions from the original view (from the business transaction) in a different currency, usually because a specification country currency is pointless due to high inflation.
Example:a Brazilian company, that manages the US dollar as a hard currency, has an incoming invoice of more than 1000 USD.The invoice is posted with a manual exchange rate of 1,834. The 2nd local currency is calculated with exchange rate type M from the transaction currency.Since the transaction currency and the 2nd local currency are identical, the amounts must be identical:
TC 1st LC 2nd LC
USD BRL USD
-1.000,00 -1.834,00 -1.000,00
On the other hand, the translation of the 1st local currency is useful, if the purpose of the update in parallel currencies consists of consolidating several company codes into one group.Many accounting principles require that you should always use the local currency (named GAAP functional currency in the U.S.)of the company code to be consolidated as a basis when you consolidate transactions in foreign currency. The 2nd local currency displays the documents in the reporting currency of the group (group currency). Here we no longer exclusively have to consider the company code view but also have to consider the group perspective.Consequently, when the transaction currency and the 2nd company code are the same, different amounts may result.This seems illogical from the perspective of the company code but it makes sense when you consider that the 2nd local currency does not display the perspective of the company code, but rather the translation of the business transaction from a group view, however, "only" the currency translation.
Example:the French subsidiary of a US group with a 1st local currency in EUR and a 2nd local currency in USD has an incoming invoice of more than 1000 USD. The invoice is posted with a manual exchange rate of 1,10. The 2nd local currency is determined with the exchange rate type M from the 1st local currency to the exchange rate of 1,15. The following values result for the payable:
TC 1st LC 2nd LC
USD EUR USD
-1.000,00 -1.100,00 -956,52
In this case, the difference between the USD amounts is justified, since the group translates from EUR using a fixed rule. What the original currency or exchange rate was is of no importance. The amount in the 2nd local currency is not consistent with the original business transaction, since the translation from the 1st local currency displaysa second business transaction with a user-defined logic for the group. This is this first step towards consolidation.
Solution
In Customizing, the paths for the currency translation are to be set accordingly.
Caution, within production systems these changes may only be made directly after year-end closings and before the start of posting in the new fiscal year.
In Customizing, the paths for the currency translation are to be set accordingly.
Caution, within production systems these changes may only be made directly after year-end closings and before the start of posting in the new fiscal year.
Source : SAP Note 335608
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