SAP Foreign Currency Valuation Process

9/21/2019 SAP Foreign Currency Valuation Process - SapGurus
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SAP Foreign Currency Valuation

Process

It is common practice for organizations to conduct transactions in currencies di erent from
their local/company code currency. This is what is referred to as Foreign Currency
Transaction.
Where open items denominated in foreign currency exist at a key date (meaning weekly,
monthly or yearly closing date), then they have to be evaluated to determine the exchange
gain/loss (exchange rate movement) arising therefrom. A foreign currency valuation (Forex
valuation) is nothing but restating the value of your foreign currency balances (assets and
liabilities) by comparing the exchange rates at the time of the creation of the open item
(Original Document generation) to the rate existing at the key date.

In this week’s posts we will be discussing the topic of SAP Foreign Currency valuation, by
going through the following:

1) Scope of Foreign Currency Valuation
Generally, currency valuations covers the following
a) Customer open items, Vendor open items and General Ledger Open Line items, Managed
in foreign currency.
b) Other General Ledger Balance Sheet Accounts Managed in Foreign Currency, but not
agged as open item management accounts.

2) Valuation Methods
The valuation method basically contains the relevant parameters in the valuation process. In
this step we make all the speci cations necessary for the SAP valuation program to run.
You set up Valuation methods by going through the menu path below:
IMG — Financial Accounting (New) — General Ledger Accounting (New) — Periodic
Processing – Valuate — De ne Valuation Methods

You can create your own valuation method by clicking on New Entries, or copy and existing
one by clicking on copy, or use a system provided one.
Click on New Entries

a) Valuation Method: Enter a key that will represent your valuation method. This is a
maximum of four character alpha-numeric key.

b) Lowest value principle: agging this indicator means that the items are valued according
to the lowest value principle. Meaning that the valuation result is only taking in to account, if
the valuation di erence between the local currency amount (of the foreign currency
transaction) at the original document creation and the newly revalued amount is negative,
that is valuation run resulted in a loss. With this procedure, the valuation is calculated per
item total, and items with same invoice reference are viewed together.

c) Strict lowest value principle: agging this indicator means the valuation is only displayed
if, the new valuation result has a greater “devaluation and/or a greater revaluation” than
the previous valuation. Just like the above, the valuation is calculated per item total, and
items with the same invoice reference are viewed together.

d) Always evaluate: Flagging this indicator means all foreign currency balances and foreign
currency open item are valuated and the revaluation result is booked irrespective of what the
result is (loss or gain).

e) Revaluate Only: If this indicator is selected, it means that the system only takes the
valuation run into consideration if it results in a gain. That is “Revalue Only – Do Not Devalue”.
This is the opposite of the “Lowest value principle”.

f) Group Vendors: Here Vendor accounts are categorized into groups, and during the
valuation process the group is then viewed as a whole and the same conditions apply to
them.

g) Group Customers: Here Customer accounts are categorized into groups, and during the
valuation process the group is then viewed as a whole and the same conditions apply to
them.

h) G/L Valuation Group: Here General Ledger accounts are categorized into groups, and
during the valuation process the group is then viewed as a whole and the same conditions
apply to them.

i) Balance Valuation: If this indicator is selected, open items are balanced per account or
group and currency. The balance is then valuated and the valuation di erence is posted as an
expense or revenue. If you do not select this indicator, the open items are summarized and
valuated per reference number. If there is no reference number, each line item is valuated
individually.

j) Post per line item: If this indicator is selected, revaluation is done at line item level. Meaning
that a line item is generated for each valuated item in the valuation posting as well as in the
adjustment account. If not selected, the valuation results are posted in a summarized form

k) Document Type: Enter the document type that the revaluation postings will use.

l) Exchange Rate Type: Select your exchange rate type for the revaluation process. Normally
the standard exchange rate type “M” (Standard translation at average rate) is used, although
you can use any custom exchange rate type you de ned.

3) Valuation Areas
By de ning your valuation areas, you can report di erent valuation approaches and post to
di erent accounts. In this IMG activity, you de ne your valuation areas for your closing
operations. The valuation method we de ned above will be assigned to our valuation area we
will de ne in this step.

Follow the menu path below to de ne your valuation area (s).
Processing – Valuate — De ne Valuation Areas

Click on new entries or copy and existing valuation area.

Specify a key to represent your valuation area, assign your valuation method to it and select a
suitable currency type (we select the company code currency).

4) Assignment of Accounting Principle to Ledger Group
In this IMG activity, we assign our adopted accounting principle to our ledger group.

Follow the menu path below to Assign Accounting Principle to Ledger Group.
Processing – Valuate — Check Assignment of Accounting Principle to Ledger Group

Click on New Entries.

Enter your adopted accounting principle (in our example GAAP) and select a target ledger (in
our example leading ledger-0L).
Save your entries.

5) Assign Accounting Principle to your Valuation Areas

In this IMG activity, you assign your adopted accounting principles to your valuation areas.

Follow the menu path below to assign your adopted accounting principles to your valuation
areas.
Processing – Valuate — Assign Valuation Areas and Accounting Principles

Click on new entries.

Select your de ned valuation area and your adopted accounting principle, and save your
entries.

6) Activate Delta Logic
The valuation process can take two forms:

a) The so called “Gross Method”, by which the program compares the exchange rate existing
on the date of the original document creation to the exchange rate prevailing on the Key
Date, and any di erence booked as exchange di erence. With this approach valuation results
are reset on the rst day of the following period (Key Date+1)
b) The Delta Logic: with this approach valuation results are not reversed on key date +1. The
delta logic ensures that the system does not execute any reversal postings for the valuation
postings in the following period. The next valuation run takes the di erence between the last
valuation date and the current key date.

If it is required for you to use the Delta valuation Logic, activate it through the following the
menu path below:
Processing – Valuate — Activate Delta Logic

Select you valuation area (in our case Z1)
To activate the delta logic for the valuation area, set the indicator for the delta logic.

7) Prepare Automatic Postings for Foreign Currency Valuation
In this activity, we de ne how, and to which accounts, the valuation results are posted. The
system reads the settings done here to determine how to automatically Post Exchange rate
di erences when valuating open items and foreign currency balances.
In the same con guration step we can also de ne the accounts for realized exchange rate
di erences during open item clearing.

You can also de ne here the Exchange Rate Key to which you assign the gain and loss
accounts for posting any exchange rate di erences that occur during valuation. The
exchange rate keys you de ne here are entered in the master records of the G/L Accounts
that you want to valuate.

Follow the menu path below to con gure automatic postings for Foreign Currency Valuation.

Processing – Valuate — Foreign Currency Valuation — Prepare Automatic Postings for
Foreign Currency Valuation

a) Double click on “Exchange rate di erence using exchange rate key” to de ne the
exchange rate key and assign the gain and loss G/L accounts to it, for the posting any
exchange rate di erences.


Click on Create, and make the relevant entries.
Save your entries.

The next step is to assign to the relevant G/Ls (in the G/L Master data) an Exchange Rate Key
created above. That assignment means that any exchange rate di erence from transactions
on this G/L will be posted to these accounts as con gured above.
Use transaction FS00 to do this assignment.

b) Double click on “Exchange Rate Dif.: Open Items/GL Acct” to maintain settings for
automatic Post of Exchange rate di erences when valuating open items and foreign currency
balances, or use transaction OB09.

Click on new entries.

Maintain your entries and save.

Exchange rate di erence realized: This is an exchange rate di erence which results at the
point of clearing an open item (example through incoming or outgoing payments). Maintain
here the P&L account that the realized di erences are to be posted. Note that this can be a
single account, or a di erent account for gain and another for loss. The o setting postings are
done on the relevant G/L account.

Valuate: You maintain here the accounts to be posted to incase of unrealized exchange
di erences arising from the valuation process. When you valuate open items in foreign
currency, the exchange rate di erence determined is posted as an unrealized exchange rate
di erence.

Note: the Field Balance Sheet Adjustment Account contains the G/L Account that is posted
to instead of the account itself that is being evaluated. This is necessary to maintain the
original value of this account, because valuation di erences are unrealized di erences. The
o setting postings go to the relevant P&L Accounts.

c) Double click on “Payment di erence for Altern. Currency” to maintain settings for
automatic Posting of Payment di erences.

Maintain your settings and save.

8) Foreign Currency Valuation Run
We can now run the currency valuation transaction after the con guration settings above.
Go through the menu path below:
Accounting – Financial Accounting — General Ledger — Periodic Processing — Closing –
Valuate — Foreign Currency Valuation (New).
Or use transaction FAGL_FC_VAL

9) Resetting Foreign Currency Valuation Run
If for whatever reason you want to undo/reset the valuation postings you have made, you can
do so. What you just need to do is to run the valuation program again entering the same
selection parameters as the valuation run, but this time agging the eld reset, as below.
What this does is to recreate the status before the valuation run, that is, all valuations posted
are set to zero by an inverse posting.

What are your thoughts on this topic. We would love to hear your comments and
suggestions.

By the way you are invited to visit the SAP Store and other stores directly from here, or
through the a liate links on the left sidebar of the home page and blog posts, for the
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This entry was posted in SAP FI (https://www.sapgurus.com/category/sap- /), Tips and Tricks
(https://www.sapgurus.com/category/tips-and-tricks/) and tagged Foreign Currency Valuation
(https://www.sapgurus.com/tag/foreign-currency-valuation/), Foreign Currency Valuation Process in
SAP (https://www.sapgurus.com/tag/foreign-currency-valuation-process-in-sap/), SAP Periodic
closing procedures (https://www.sapgurus.com/tag/sap-periodic-closing-procedures/). Bookmark
the permalink (https://www.sapgurus.com/sap-foreign-currency-valuation-process/).
← Other Special G/L Transactions- Guarantees, payment requests, and creation of own Special G/L
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19 thoughts on “SAP Foreign Currency Valuation

Process”
1. Ahmed Kadry says:
February 11, 2017 at 8:47 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
process/#comment-75)
Wonderful Topic
Reply (https://www.sapgurus.com/sap-foreign-currency-valuation-process/?
replytocom=75#respond)
2. Saurabh Sharma says:
May 11, 2017 at 6:26 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
Very well explained
3. madhuri says:
June 6, 2017 at 6:55 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
explained well but try to de ne GL account heads for more clari cation
4. Ravi says:
August 6, 2017 at 4:24 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
Very well explained
5. Andreas says:
Hello, excelent presentation of teh subject.
The only issue is that I have a customer that would like to run valuation for customers
based on each customer balance and create one posting for each customer. Is this
possible?
Thank you and best regards
Andreas
6. Ravi says:
September 14, 2017 at 6:37 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-
This has been very useful. However, the IMG path looks di erent if we are NOT using
New GL.
Are you in Scottsdale, AZ?
Really appreciate your help.

Thanks.
Ravi
7. Emilie says:
October 9, 2017 at 5:34 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
Hello, thank u so much for this.
In the nal run, what if I tick the ‘Reverse postings’ but the valuation used is Delta logic.
What would prevail? Will the valuation results still reverse?
Appreciate your help

8. prabhjyot singh says:
November 27, 2017 at 4:29 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
Can you tell me how to get the vendor account no. for the o setting account. Refer your
second last pic.
9. Kurnool Ra says:
December 31, 2017 at 9:04 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-
Hi Sap Gurus the topic is explained in a good way it wll be very usefull if u can explain
the ledgers use in this demo Thanks in Advancr
10. Kurnool Ra says:
January 1, 2018 at 10:40 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
Excellent manual with steps but i think that brief explanation of GL used should have
been given so that it will be easy to understand and test.
Please let me know what G/L were created and used in FCV. Thanks for your guidance
and support
Thanks SAP Gurus
11. Mohamed Bashir says:
January 14, 2018 at 8:40 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
many thanks
12. Sangeeta Jha says:
Beautifully depicted ,I have a question …in real scenario we will run for thousand if GLs at
one go, how can we determine if a particular GL did not run / posting for this GL open
items were revalued or not ? …..since there will be hundreds of posting in foreign
currency gain n loss account con gured in OBA1 Setting ,how to nd out which one is
corresponding to my GL account in question !
13. Sangeeta Jha says:
Beautifully depicted ,I have a question …in real scenario we will run for thousand if GLs at
one go, how can we determine if a particular GL did not run / posting for this GL open
items were revalued or not ? …..since there will be hundreds of posting in foreign
currency gain n loss account con gured in OBA1 Setting ,how to nd out which one is
corresponding to my GL account in question !
14. Saurabh Sharma says:
April 13, 2018 at 12:29 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-
Excellent Presentation !! Keep it continue to share your knowledge with others th. your
Blog.
Could you please write one Blog on Parallel Currency in Fixed Asset
Many Thanks!!
15. Paramjeet Singh says:
May 2, 2018 at 10:47 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
The way of explaining every topic is so helpful. Keep the excellent work up.
16. Sureesh says:
July 4, 2018 at 6:06 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-
Very good and understandable explanation.
17. udayh7gj (http://wisdom.infotech.co.in) says:
July 16, 2018 at 6:47 am (https://www.sapgurus.com/sap-foreign-currency-valuation-
“Which Forex pair and time frame is best to trade” is the frequently asked question and I
want do give you the DEFINITE ANSWER.
Are you expecting that I am going to say something like EUR/USD on 5-minute time
frame or GBP/USD on daily…? No, it is not so simple, but SIMPLE ENOUGH we can
gure it out!
The “PROBLEM” is that markets change over time. If GBP/USD was a well trending
currency pair a few years ago, today it is another one.
I actually want to let you know about a SPECIAL TOOL that I use to nd the BEST
TRENDING PAIRS among all the Forex pairs.
http://www.forextrendy.com?hfsdtb63546 (http://www.forextrendy.com?
hfsdtb63546)
The software scans 34 Forex pairs on all time frames from minute to monthly. This way
you pick the best trending pair and time frame at the current time.
The system is running on our powerful computers, so you have nothing to download
and install. Just join in and start using it within a FEW MINUTES! Get it on the link below:
http://www.forextrendy.com?hfsdtb63546 (http://www.forextrendy.com?
hfsdtb63546)
18. RRR says:
August 3, 2018 at 3:03 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-

Hi, It was wonderful explanation. I have a question. After reset process, if i have to do
revaluation again for the same parameter how we have to do.
Will system allow me to do it. When i tried it system displayed the message already all
documents are revaluated.
1. Ebrima Fatty (http://www.sapgurus.com) says:
You cannot run a revaluation for the same parameter twice. This is sure even after
the reset, because the reset is usually a date after the revaluation run date. As far
as the system is concern, revaluation was run for that date.
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SAP Foreign Currency Valuation

5) Assign Accounting Principle to your Valuation Areas

The valuation process can take two forms:

IMG — Financial Accounting (New) — General Ledger Accounting (New) — Periodic

Save your entries.

Or use transaction FAGL_FC_VAL

19 thoughts on “SAP Foreign Currency Valuation

Really appreciate your help.

Appreciate your help

August 3, 2018 at 3:03 pm (https://www.sapgurus.com/sap-foreign-currency-valuation-

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