Ask the SAP Financials Expert: Demystify Foreign Currency Valuation with F.05

  • by Dr. Stef G.M. Cornelissen, MBA, SAP Business Consultant, Sperry Partners BV
  • June 15, 2006
If your company has open items in foreign currencies, you need to know how exchange rate fluctuations are affecting your bottom line. Learn the ins and outs of a highly useful but sparsely documented transaction and gain a complete view of currency valuation.
Key Concept

“You can achieve a lot through the SAP standard transaction F.05 (foreign currency valuation). However, a lack of information surrounds that area. Whatever I have learned and gathered from others is just a result of trial and error. I have not found a comprehensive explanation of the configuration, the selection criteria, and the output of this transaction. I would like to appeal to SAP Financials Expert to throw some light on this functionality.”

— SAP FI/CO Analyst, Hillsboro, OR

In a nutshell, transaction F.05 ensures that open items in foreign currencies are valuated against the most recent exchange rates, and that the possible gain or loss is made visible on separate accounts. This action makes any risk associated with foreign currency positions in internal or external financial statements visible. It is a standard procedure during period-end closing.

Just a quick example to start: Let’s assume you have a position in Polish zloty (PLN) with Bank X. You have an open item managed general ledger (G/L) account in PLN to administer this foreign currency bank account. This month’s statement shows an open item of 100.000 PLN. On the document, the exchange rate is 0.3315982 translating the amount as $33,159.82 (your local currency). At month-end, the exchange rate for PLN has changed to 0.3215982, reducing the theoretical value of your bank balance to $32,159.82. To report this potential loss you need to post the difference, $1,000, to a dedicated profit/loss (P&L) account for exchange rate expenses. Note that although my example shows a loss, you could also experience a gain.

Dr. Stef G.M. Cornelissen

Dr. Stef G.M. Cornelissen, MBA, is an experienced international SAP business consultant from the Netherlands with certifications in FI, CO, and SD. He took part in important international projects involving the large Dutch multinationals. Before specializing in SAP, he worked as a management consultant and was a senior advisor to the Board of Directors of the University of Nijmegen. Stef's academic background is in business administration, economics, and organizational science. He is the owner of Bowstring BV and principal partner at Sperry Associates.

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Comments

2/26/2013 4:20:02 AM
Aashish Kedia

Hi,

in a multi-currency (OB22) scenario, does the Foreign currency revaluation work differently?

Regards
Aashish

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