Currency Types: The Key to Reporting Parallel Valuations

  • by Rohana Gunawardena, SAP Practice Director, Quality Systems & Software
  • April 15, 2006
Do you know what the different currency types are, where they are configured, and when to use them? Confusion abounds in this area, especially when dealing with parallel valuation.Use this roadmap to gain control of all of your conversions and valuations.
Key Concept

You are probably familiar with the currency codes in SAP (e.g., United States dollars [USD], euro [EUR], Japanese yen [JPY]). These indicate the specific currencies used to record transaction values. Currency types control the specific currency codes in which financial transactions are recorded. In SAP, a single financial transaction is recorded using multiple currency types. A minimum of two currency types is used to record all financial transactions in General Ledger Accounting (FI-GL), document currency, and company currency. Different currency types may map to the same or different currency codes for a specific transaction based on the data input (e.g., company code, cost center, document header currency).

When performing the basic configuration for all financial modules, the term “currency type” inevitably crops up. It’s a key choice you make early in finance configuration that can be difficult to change later on.

Configuring General Ledger Accounting (FI-GL) or Special Purpose Ledger (FI-SL) to store values in multiple currency types enables you to track a single transaction in multiple currencies, referred to as parallel valuation. This allows you to perform reporting quickly in different currencies. For more about parallel valuation with the new General Ledger (G/L), see “Streamline Your Parallel Accounting with the New G/L Ledger Solution,” by Aylin Korkmaz in this issue.

Consider a UK company, with local currency (also known as company currency in SAP) of British pounds (GBP), that is a subsidiary of a French company with local currency euro (EUR). For local reporting, the UK company produces reports in GBP, while for group reporting the corporate head office needs consolidated reports in EUR. Storing transaction values in both GBP and EUR allows you to meet both reporting needs quickly. If transaction values were stored in GBP only, the GBP values would have to be converted to EUR whenever consolidated group reports were required, slowing down the process.

You can also use currency types to store transaction data at different valuations. For example, when you make an inter-company sale using a transfer price, you (the selling company) make a profit. However, this intercompany profit can not show on consolidated group reporting. Storing transactions with both legal and group valuation allows you to produce both local company accounts, with the intercompany profit, and consolidated group accounts, without intercompany profit, quickly.

I will explain what a currency type is and how it affects financial reporting. I use values found in SAP R/3 Release 4.7, although the information and steps I give apply to all SAP R/3 releases from 3.0 to mySAP ERP Central Component 5.0. You will have the information you need to determine the currency type configuration suitable for your organization.

Rohana Gunawardena

Rohana Gunawardena is the SAP practice director at Quality Systems & Software, a specialist SAP consulting firm. Rohana has been working with SAP since 1992, focusing on the order-to-cash process with emphasis on global rollouts, business segment reporting, cross-module integration, and the financial impact of supply chain management transactions. He also has helped many clients on detailed system correction projects (e.g., correcting inventory balances, retrospectively activating group currency, and cleaning intercompany accounting transactions). Rohana has spoken at many SAP conferences and has published more than 20 magazine articles on various aspects of SAP. He is a fellow of the Institute of Chartered Accountants in England & Wales.

Rohana will be presenting at the upcoming SAPinsider Financials 2017 conference, June 14-16, 2017, in Amsterdam. For information on this event, click here.

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