Oracle Fusion Cash Management Release 13.18.

10 (18C)

Create External
Transactions for
Exchange Gain and Loss,
or Bank Charges
 Create External Transactions for Exchange Gain and Loss, and Bank Charges

OVERVIEW
The bank statement reconciliation involves reconciling the statement lines with the source transactions. The bank statement line
amount can differ from the source transaction amount due to the following reasons:

 Charges: The transaction processing involves charges. The charges can be processing fee, transaction fee, commission,
discounting, or collection charges. These charges are part of the statement line amount.

 Currency exchange differences: This occurs for foreign currency transactions where the conversion rate is different from
the date the transaction was created and cleared in bank, due to fluctuations in the conversion rate.

During the reconciliation, Tolerance rules are defined to identify the amount difference between statement line and system
transactions. Any amount difference within the amount tolerance is automatically created as an external transaction, with the
origin: Reconciliation Difference.

From 18C onwards, when tolerance amounts are applied, the reconciliation differences generated during 1-1 matching of Payment/
Receipt reconciliation, can now be created for specific foreign exchange gain/loss and bank charges accounts.

The foreign Exchange Gain, Foreign Exchange Loss, and Bank Charges accounts are defined at Bank Account – Business Unit access
level:

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

Business Rules

1. The foreign exchange gain/loss or bank charge accounts will be used only for 1-1 matching of payments and receipts.

For foreign exchange gain/loss - If the foreign exchange gain/loss account is setup for the payment/receipt business
unit, then this account will be defaulted. Else, the reconciliation difference account will be used to create the external
transaction.

For Bank charges/Forex charges - If the bank charges account is setup for the payment/receipt business unit, then this
account will be defaulted, else the reconciliation difference account will be used to create the external transaction.

2. For all other matching scenarios (1-M, M-1, M-M) and reconciliation of other source transactions (payroll/external transactions),
the reconciliation difference account will be used to create the external transaction:

3. The system will always check for the validity of the account code combinations before creating the external transactions.

Domestic currency bank account – Multi-currency disabled

For domestic bank accounts, non-multicurrency account (transaction currency = bank account currency = ledger currency):
- Any amount difference (under the tolerance rule) between the bank statement line amount and the transaction amount,
will be considered as bank charges.

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

Domestic currency bank account – Multi-currency enabled

For foreign currency transactions, the exchange difference calculation will use the Original Amount and exchange rate provided on
the bank statement line (Foreign Currency Information):

The original currency, amount, and exchange rate will generate the Cleared amount, and it will be compared with the bank
statement line amount, and transaction amount, resulting in:

 Foreign Bank Charges - The difference between the cleared amount in base currency (original currency amount *
exchange rate) and the bank statement line amount will be treated as bank charges. An external transaction will be
created using the bank charges account.

 Exchange difference - The difference between the cleared amount in base currency (original currency amount *
exchange rate) and the payment/receipt amount will be treated as foreign exchange difference. An external
transaction will be created using the foreign exchange gain/loss account.

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

STEPS TO ENABLE THIS FEATURE

1. Opt-in the Create External Transactions for Exchange Gain or Loss feature

1.1. Go to the Setup and Maintenance and select – Financials> Cash Management and Banking > Change Feature Selection

1.2. Click on the Enable checkbox for Create External Transactions for Exchange Gain or Loss feature

2. Setup Foreign Exchange Gain, Foreign Exchange Loss, and Bank Charges accounts at Bank Account setup.

2.1. Go to Manage Bank Accounts tasks.

2.2. Edit your Bank Account, and go to the Business Unit Access tab:

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

3. Define the Foreign Exchange Gain, Foreign Exchange Loss and Bank Charges accounts for each Business Unit:

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

WORKED EXAMPLE – MULTICURRENCY ACCOUNT

1. Review Setup for BofA-204 bank account:

 Multicurrency enabled
 Reconciliation Differences: 01-000-1222-0000-000
 Bank Charges for Vision Operations: 01-740-7870-0000-000
 Foreign Exchange Gain: 01-740-7842-0000-000
 Foreign Exchange Loss: 01-740-7844-0000-000

2. Review Tolerance Rule for BofA-204 bank account:

Amount Tolerance: Enabled

 Amount Below: 200
 Amount Above: 200

3. Create an Invoice for BofA-204 of EUR 100.00:

4. Create a payment for this invoice:

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

BANK CHARGES X EXCHANGE GAIN/LOSS

 Bank Charges - The difference between the cleared amount in base currency (bank statement line original currency amount *
exchange rate) and the bank statement line amount will be treated as bank charges.

 Exchange Difference - The difference between the cleared amount in base currency (bank statement line original currency amount *
exchange rate) and the payment/receipt amount will be treated as foreign exchange difference. An external transaction will be created
using the foreign exchange gain/loss account.

 Bank Statement Line Information (Line Amount, Original Amount, and Exchange Rate)
 Original Amount = 100.00 EUR
 Exchange Rate = 1.306
 Cleared Amount = 100.00 * 1.306 = 130.60 USD
 Bank Statement Line Amount = 135.00 USD

 Manual Reconciliation

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 Create External Transactions for Exchange Gain and Loss, and Bank Charges

Cleared Amount = Bank Statement Line Original amount * Exchange Rate

Cleared Amount = 100.00 *1.306 = 130.60

 Bank Charges = Cleared Amount – Bank Statement Line Amount = 130.60 - 135.00 = -4.40
 Exchange Gain/Loss = Cleared Amount – Payment/Receipt Amount = 130.60 – 130.58 = 0.02

Results after Reconciliation: