Foreign currency accounting becomes much clearer once you separate two moments: translating a transaction when it is posted, and revaluing balances at the period end. Conflating them is what makes the topic feel difficult.
Three currencies at once
SAP stores several currency amounts on the same document, so the same transaction shows different figures depending on which currency you look at.
| Currency | Meaning | Example |
|---|---|---|
| Transaction currency | The currency the deal was actually done in | USD for a USD-denominated import |
| Company code currency | The local ledger currency; the statements are produced in it | JPY for a Japanese entity |
| Group currency | The currency used for consolidated reporting | USD if the parent is American |
Posting a foreign currency transaction translates the amount into company code currency automatically and stores both. Because statements are produced in company code currency, that translated figure is the carrying amount.
Exchange rate types
Different purposes call for different rates. SAP holds rates under a rate type, and configuration decides which type a document or valuation method uses.
| Type | Name | Typical use |
|---|---|---|
| M | Standard translation (average) | Everyday document posting; the default |
| B | Bank buying rate | Valuing transactions where currency is sold |
| G | Bank selling rate | Valuing transactions where currency is bought |
| P | Planning rate | Budgeting and translating plan figures |
Rates are maintained in OB08 by rate type, currency pair and validity start date. At posting, the most recent rate valid on or before the date applies.
Realised and unrealised
Exchange differences come in two kinds, and telling them apart is the key to the whole topic.
- Realised: the difference fixed when a receivable or payable is actually settled. A USD receivable worth ¥1,000,000 when invoiced and ¥1,050,000 when paid produces a realised gain of ¥50,000, posted automatically during clearing.
- Unrealised: the difference produced by revaluing still-open foreign currency balances at the closing rate. Because it is not yet fixed, it is normally reversed at the start of the following period.
Valuation at period end
At the close, open foreign currency balances are revalued at closing rates, using FAGL_FCV under the new general ledger.
Receivables, payables and foreign currency bank balances are in scope. The difference is posted to exchange gain or loss in the P&L, with a valuation adjustment account on the balance sheet side.
| Setting | What it decides |
|---|---|
| Valuation method | Rate type used, whether losses only or both gains and losses are recognised, and whether the entry reverses |
| Valuation area | The category the result is recorded under; can be split per accounting standard |
| Account determination | Which accounts receive the exchange difference and the valuation adjustment |
Translation versus valuation, once more
To restate it: translation at transaction time converts a foreign amount into ledger currency, and the figure is fixed at that day rate. Valuation at period end revisits balances already on the books at the prevailing rate.
The first happens on every transaction; the second only at defined closing points, and what it produces stays provisional until settlement. Hold on to that structure and most foreign currency processing becomes readable.