Is Your Foreign Currency Revaluation FASB 52 Compliant?

  • by Susanne Finke, SAP Consultant, ZANN Consulting, LLC
  • October 15, 2006
Compare methods of configuring and executing foreign currency revaluation in your SAP system to determine which method best suits your needs while meeting US Financial Accounting Standards Board Statement No. 52 (FASB 52) requirements, which govern foreign currency revaluation.
Key Concept

Currency type 10 revaluation is the difference of the open payables/ receivables balance of the current periods, using the current exchange rate, less the original or prior periods. You select the original or prior periods depending on whether you calculate incremental or cumulative balances. Currency type 30 revaluation is the difference of the current period’s valuated balance of open payables/receivables less the original or prior periods. You can execute the foreign currency revaluation at month-end to post currency type 10 and type 30 revaluations via transaction code F.05.

The US Financial Accounting Standards Board (FASB) requires you to revaluate foreign currency postings in payables and receivables on a monthly basis. Additionally, you must calculate the exchange rate gain or loss between the local currency and group currency exchange rates to make a cumulative translation adjustment (CTA).

Companies running the original method of SAP foreign currency revaluation are not completely FASB 52 compliant. They probably are not getting the correct translation posting from currency type 10 revaluation to their group currency reporting. SAP has introduced a second method using valuation areas. It solves some problems and provides correct reporting, but carries some disadvantages. I developed an undocumented third method of execution through numerous implementations I’ve worked on. It combines the best of both the original method and the recently implemented valuation method. I’ve tested it through mySAP ERP Central Component (ECC) 6.0. I’ll describe these methods and the advantages and disadvantages of each using a sample company with the following currency types: transaction currency is GBP, local/company code currency is EUR, and group currency is USD.

Susanne Finke

Susanne Finke has 26 years of business experience and more than 15 years of consulting experience in SAP Financials modules (FI, CO, TR, and AA), with R/3 versions 2.2e through SAP ECC 6.0. She is the author of the book, SAP Foreign Currency Revaluation: FAS 52 and GAAP Requirements (Susanne Finke; Copyright © 2006, ZANN Consulting, LLC., published by John Wiley & Sons, Inc.). She also wrote “Is Your Foreign Currency Revaluation FASB 52 Compliant?”, which was posted to the Financials Expert knowledgebase in October 2006.

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