AC660_EN_Col51_FV_Inst_A4 (第7页) | ERP软件技术分享

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AC660 Lesson: Currency Translation Methods and Keys

Thefollowingexampleshowsthedifferencesinthetranslationofvalueswiththe

translationkeys1(periodendrate)and5(monthlyrate).

Theperiodvaluesandperiodratesareprojectedasinitialvalues.

Translation key 1

Period 1: LC 100 * 2.0 = GC 200

This value is posted.

Period 6: LC 250 * 3.0 = GC 750

The total annual value is translated here.

200hasalreadybeenposted. OnlytherestofGC550isbookedinperiod6.

Translation key 5

LC 100 * 2.0 = GC 200

LC 150 * 3.0 = GC 450

Here,onlytherespectivemonthlyvalueiscalculatedandposted.

Determination of Exchange Rates

Mentiontherelationshipbetweenthecurrencytranslationkeyandexchangerate

indicator again here.

The exchangerateindicator isdependent onwhich currency translation key is

used. Accordingly, translation keys 1, 2, 5, 9, and A require an exchange rate

indicator,whilealltheothertranslationkeys(0,3,4,6,7)donot.

Explain thedetermination of theexchange ratesfor translation keys 1, 2, 5, 9,

and A as follows:

Currency translation is started (through the data monitor, for example) in a

consolidationversionthatisspecifiedbytheglobalparameters(suchasversion

100, which is used by the instructor and participants in this course). This

consolidationversionwasalsoassignedaspecialversionfortheexchangerates

(100).

Theexchangerateindicator, suchas1, current exchange rate, isdefinedin the

exchange rates node of currency translation customizing. The combination

of defined exchange rate indicator and the version used is then assigned a

time-specific exchange rate, year and period effective. You then define the

translationratiosand–inadifferenttable–thecorrespondingexchangeratesfor

eachoftheseexchangeratetypes, withafromdate.

IfanyoftheparticipantshaspriorexperiencewiththeFI-CLcomponent,point

out this fundamental difference between the two procedures for determining

exchange rates:

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Unit4: CurrencyTranslation AC660

WhileFI-LCusesthefixedcombinationofversionandexchangerateindicator

(such as 1001) from the exchange rate table, the combination of version and

exchangerateindicator(1001)inSAPConsolidationcanbeassignedanexchange

ratetypethatisalreadyusedintheFIcomponent(suchasM),whichallowsthe

systemto readtheexisting exchangeratesfor thisexchangeratetypefromthe

exchangeratetable. Incontrast,theexchangerateswouldhavetobeenteredin

theexchangeratetableforallexistingexchangeratetypes.

BeforeyoudemonstratetheCustomizinginthesystemindetail,makesureyou

explain the technical background.

Systemdocumentation-Exchangerateindicator: Classificationofexchange

rates. Examples:

• Current exchange rate

• Average rate

• Historical exchange rate

Systemdocumentation -Currencytranslation key:

Thecurrencytranslationkeysetstheprocedureforexchangeratedetermination

(such as historical or current exchange rates). Furthermore, the currency

translation key determines the base currency for currency translation. The

followingbasecurrenciesexistintheconsolidationsystem:

• Local currency

• Transaction currency

Systemdocumentation-Referenceexchangerateindicator:

To calculate currency translation differences, the difference to the reference

method is calculated for each financial statement item. The reference method

is usually the current-rate method. The comparison value is calculated by

multiplying the local amount by the exchange rate, which is read from the

exchange rate tableusingthekey specified here.

Entering“*”atthispointmeansthattheexistingvalueinthegroupcurrencyfield

isusedtocalculatethecurrencytranslationdifferences.

Additional information:

Currency translation key 8 hasbeenassigned to aspecific customer. It cannot

beusedforthegeneraltranslationkeys. Asaresult, translationkeyAhasbeen

definedandisdistributedasanadditionalcurrencytranslationkey.

Systemdocumentation-Currencytranslationdifference:

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AC660 Lesson: Currency Translation Methods and Keys

Differencefromacurrencytranslation;canhavethefollowingcauses:

• Changes in the exchange rates over time, such as between two balance

sheet key dates

• The use of different exchange rates, such as the historical exchange rate

andcurrentexchangerate,whentranslatingtheindividualassets,payables,

expenses, and revenues

Currencytranslationdifferencesmustbetakenintoaccountinsomewayinthe

translatedyear-endclosing. Otherwise,nobalancingadjustmentwillbepossible.

Currencytranslationdifferencescanbepostedeitherwithorwithoutaneffecton

netincome, dependingonthechosendifferenceitems.

Figure 48: Determination of Exchange Rates

The translation keys 1, 2, 5, 9, and A require the entry of an exchange rate

indicator.

Theexchangerateindicatorspecifieswhether thecurrentrate, averagerate, or

historical rate is used.

You assign the exchange rate indicator to the exchange rate type, time and

version-dependent. Theexchangeratetypeisthekey,underwhichyoudefinethe

exchange rate in the system.

Whenyouconfigurethecurrencytranslation,youhavedefinedtheconsolidation

version in the global parameters.

The consolidation version contains the currency translation version. All

Customizingsettingsarestoredunderthisspecialversion. Asaresult,youcanuse

these settingsin other consolidation versions.

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Unit4: CurrencyTranslation AC660

Theexchangeratetablecontainsavalidityareaandthecurrencyexchangerate

for each exchange rate type.

Demonstration: Currency Translation

Purpose

Todemonstratethecustomizingforcurrencytranslation

System Data

System:

Client:

UserID:

Password:

Setupinstructions:

1. Demonstratethecustomizingforcurrencytranslation.

2. Startthecurrencytranslationtaskinthedatamonitor.

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AC660 Lesson: Currency Translation Methods and Keys

Facilitated Discussion

To discusscurrencytranslationmethodsand keys

Discussion Questions

Usethefollowingquestionstoengagetheparticipantsinthediscussion.Feelfree

to use your own additional questions.

Discusscurrency translation methodsand keys.

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Unit4: CurrencyTranslation AC660

Lesson Summary

You should now be able to:

• Determine the need for currencytranslation

• Evaluate currency translation methods

• Use currency translation keys

• Determine exchange rates

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AC660 Lesson: Translation and Rounding Differences

Lesson: Translation and Rounding Differences

Lesson Duration: 50 Minutes

159

Lesson Overview

Thislessonwillhelpyouunderstandthetranslationdifferencesextensively. You

willlearnhowtomanagecurrencytranslationdifferences. Youwillalsolearnhow

tocalculateroundingdifferences. Inaddition, youwill examinetheconceptof

customizing. Finally,youwilllearnhowtoexecutecurrencytranslation.

Lesson Objectives

After completingthislesson, youwillbeable to:

• Examinethetranslationofindividualfinancialstatementvaluesintogroup

currency

• Managecurrencytranslationdifferencesthatdonotaffectnetincomeorthe

ones that affect net income

• Explain rounding differences

Bringout thatnot all thefinancialstatementitemsofthebalancesheet/income

statement can be translated according to the reference exchange rate. Provide

informationaboutthetreatmentofcurrencytranslationdifferencesnotaffecting

netincome. Outlinethetreatmentofcurrencytranslationdifferencesaffectingnet

income. Explain howrounding differencesoccur.

Business Example

The group G1 plans to introduce the SAP Consolidation by the end of this

year. Youneedtodefinetheselectedthatyourequireforanupdateofcurrency

translation differences that affect net income.

Translation into Group Currency

Thereferenceexchangerateisthepredefinedgroupcurrentexchangerate.

Not all financial statement itemsof thebalancesheet/incomestatement can be

translated according to this exchange rate.

Thecurrencytranslationdifferencearisesfromthecomparisonbetweentranslation

atthereferenceexchangerateandtheitem-specifictranslation.

Intheincomestatement,mostitemsaretranslatedattheaveragerate,thereforein

comparisontothetranslationatthereferenceexchangeratethereisadifference.

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Unit4: CurrencyTranslation AC660

Itispostedtothecurrencytranslationdifference(CTD)account. Asaresultthe

annual net income(ANI) changes. Thevaluethat is transferred in the balance

sheet, is made up of the calculatedANI + CTD.

Figure 49: IndividualFS:Translation into Group Currency

The individual financial statement values are first translated using areference

exchangeratethatyouassignedtothetranslationmethodbyspecifyingareference

exchangerateindicator. Thisensuresthatalltheitemsfromthebalancesheetand

income statement are translated consistently.

Duringcurrencytranslation,ifyouwanttotranslatecertainitemsusingparticular

exchangerates,suchastheincomestatementusinganaverageexchangerate,it

willresult intranslationdifferencesbetweenthetranslationusingthereference

exchangerateandthatusingtheaverageexchangerate.

Referenceexchangerateind. “*”: Thisentrymeansthatthevaluesthatalready

exist in group currency areusedto determine the translation differences. Asa

rule, groupcurrencyvaluesalready exist ifyouusetheautomaticdatatransfer

for real-timeupdates, periodicalextracts, or rollups.

Translation Differences

TreatmentofDifferencesNotAffectingNet Income

Forallitemsofthetransferredassets(FSitemset)translationshouldbeexecuted

according to exchange rate indicator 3 (historical rate) and translation key 1

(translationLCaccordingto theperiodend rate).

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AC660 Lesson: Translation and Rounding Differences

The difference resulting from the highervaluation of the transferred assets is

posted on the liabilities side as a currency translation difference in a separate

financial statement item.

IntheCustomizinglevel“Changedimensiontranslationmethods”youcanshow

the assignment for the consolidation chart of accounts and for the reference

exchange rate in the detail screen.

Intheupperleftpartofthescreenabalancesheet(individualfinancialstatements)

is presented.

Thelowerhalfofthescreenshowsthevaluesaftertranslation.

Translation according to reference exchange rate 2.0 and translation of the

transferredassetsatthehistoricalratearedisplayedbottomleft.

Inthecomparisonbetweenthereferenceexchangerateandhistoricaltranslation,a

translationdifferencearises,thatmustbeposted(postingrecord: assettocurrency

translation difference).

Thisrevenuecaneitherbepostedaffectingnetincomeintheincomestatementor

not affecting net income in the balancesheet.

Treatment ofDifferencesAffectingNet Income

Regardlessofwhetherresultfromthetranslationofthebalancesheetitemsorthe

incomestatementitems, thecurrencytranslation differences(CTD) arealways

postedintheincomestatementinthetreatmentofdifferencesaffectingnetincome.

Thetwocurrencytranslationdifferencesaremodeledintheupperleft.

1. Balancesheetbyexchangerateaccordingtomethodentry: transferredassets

werevaluatedatthehistoricalexchangerate,theotherfinancialstatement

items at the current exchange rate.

2. Allfinancialstatement itemsfromtheincomestatementwerevaluatedat

the average rate.

The following differences arise:

1. Translationoftransferredassets: difference500

2. Translation by averagerate: difference250

Thesetwodifferences(atotalof2500)changetheannualnetincomefrom6500to

9000. 8000(ANI6500+CTD/IS1500)istransferredintothebalancesheet. In

thebalancesheet,theCTD/balancesheetisreportedseparately.

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Unit4: CurrencyTranslation AC660

ThetreatmentofdifferencesaffectingnetincomeisnotallowedaccordingtoUS

GAAP,becausetheincreasedANIdoesnotresultfromanoperationalactivity.

Hint: System documentation: Currency translation differences

(Indicator “Doesnot affect net income”):

When an item set that consists of balance sheet items is assigned a

differenceitemfromtheincomestatement,thedifferencepostingsaffect

both net income and profitability.

This indicator is always deactivated (it cannot be set by the user) and

serves information purposes only.

Assoonas“Affectsnetincome”appears,theselectedfinancialstatement

items are posted.

The course example does not have a configured example for posting

currencytranslationdifferenceswithaneffectonnetincome,becausea

consolidatedfinancialstatementisstoredaccordingtoUSGAAP.

Example for Different Translations

Differentfinancialstatementitemsfromthebalancesheetmaybetranslatedwith

differentexchangerateindicatorsforvariousreasons.

Theupperhalfofthescreenshowsthebalancesheetvalueswiththecorresponding

exchange rates and translation keys:

Capitalstock: Thevaluewasacquiredinapreviousyear; theacquisitionvalue

(localcurrency1500,groupcurrency600)doesnotchange.

A further acquisition was posted in the year to close, and is translated at the

current exchange rate of 0.5.

Thereceivablesandretainedearningsarealsotranslatedatthecurrentexchange

rate of 0.5. The common stock (local currency 2500) is managed in currency

translationwithitshistoricalvalueinthegroupcurrency(1000).

The reference exchange rate (0.5) results in a value of 1250, which means a

difference of -250 exists.

Thedifferencebetweenthereferenceexchangerateandgroupvalueforcapital

stock is 150.

The total currency translation difference is-100.

Hint: The graphic Example for Different Translations shows the

determination and posting of thecurrency translation difference inthe

caseofappropriationofretainedearningsinthebalancesheet.

TotalsDatabase-TemporalTranslationDifferencesRecord:

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AC660 Lesson: Translation and Rounding Differences

Ifrequired,youcandefineinthemethodentriesoftranslationmethods,whether

in addition to transaction difference, you also want to determine the temporal

translationdifferenceandreportseparatelytothedatabase.

Thetemporaltranslationdifferencerecorddocuments,howinterimexchangerate

fluctuationsofthereferenceexchangeratehaveaneffectontheFS itemvalue

in group currency:

Thereforethetemporaltranslationdifferencearisesfromanewvaluationmethod

for the prior period value of an item.

The temporal translation difference can only be reported for some currency

translationkeys(currencytranslationkeys1, 9andA).

TheseparaterecordisachievedwiththeindicatorTemporaltranslationdifference.

Internaltranslationindicatorsareusedforthis,inordertodifferentiatethedata

records.

Inthepresentexample,thelocalvaluechanges(1000)from000/LJJJthroughthe

newreference exchangeratefrom1500 to 1600.

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Unit4: CurrencyTranslation AC660

Iftheindicatortemporaltranslationdifferenceisselected,thenthefollowingdata

records are generated:

1. Data record (translation indicator 0):

Periodvalueinlocalcurrencyoftransaction(100).

The system determines the period value in group currency (100 * 1.6 =

160)Theperiodvalue(1500)andtheperiodvalueingroupcurrency(160)

result in the total (1660).

2. Data record (translation indicator 2):

Record valuation difference: 100

Intotalacurrencytranslationdifferenceof1760isreported.

Note: Fordidacticreasonsyoushouldnotconsolidatethepresentationof

temporal translation differences.

Hint: The example assumes that the exchange rate of the translation

method(referenceexchangerate: 1.5old/1.6new)isidenticaltothatof

themethodentry(exchangerate: 1.5old/1.5new).

Athirddatarecord(translationindicator1)isgenerated: iftheexchange

ratesofthetranslationmethod(referenceexchangerates: 1.6old/2.0new)

aredifferentfromthatofthemethodentry(exchangerate: 1.7).

Afourthdatarecord(translationindicator3)isgenerated: iftheexchange

rates of the translation method (reference exchange rates: 1.6 old/2.0

new) are different from those of the method entry (exchange rate: 1.7

old/1.9 new).

Caution: Iftemporaltranslationdifferencesarereportedseparatelyinthe

summarydatabase,thenthevolumeofdataincreases.

Underunfavorablecircumstancesthevolumeofdatacandouble.

AssetHistorySheet: TemporalTranslationDifferences

RecordAssetHistorySheetatCurrentRate: Method

Assethistorysheets,whichshowchangesinassetvaluesbetweentheopeningand

the closing balance, are often required as a supplement to both the individual

and consolidated financial statements.

Ifthetransferredassetsisnottranslatedhistoricallyaccordingtoacquisitionyears,

ratheratthecurrentexchangerateofthecurrentperiod,thenthealteredcurrent

exchangeratesinfiscalyearchangesleadtotemporaltranslationdifferences. The

closingbalancefortheprioryearnolongercorrespondstotheopeningbalanceof

the current year.

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AC660 Lesson: Translation and Rounding Differences

Theexampleshowshowyoureporttemporaltranslationdifferencesseparatelyin

theassethistorysheetandbydoingthiscreateatransferoftheclosingbalanceof

theprioryeartotheopeningbalanceofthecurrentyear.

Fortheperiodsofthecurrentyear,theexchangeratetypeforthecurrentexchange

rateofthecurrentperiodaswellastheexchangeratetypeforthecurrentexchange

rateofthelastperiodoftheprioryearareintheexchangeratetable.

Incurrencytranslationthesystemdeterminesthetemporaltranslationdifferences

fortheAPCaswellastheopeningbalanceofthecumulatedvalueauthorizations.

• The temporal translation differences are posted to the item Currency

differencesopeningbalancewiththesubitemtransactiontype(105).

• TheitemsAPCaswellasOpeningbalanceofcumulatedvalueauthorizations

are reported separately.

• Thesystemtranslatestheremainingassetitems(acquisitions,depreciation,

transfers,andsoon)usingthecurrentexchangerateforthecurrentyear.

Methodentry for currency translation method:

Definition FS item sets/subitem sets:

1. Opening balance APC; restricted to the subitem for the acquisition and

productioncosts(APC)Thedifferenceispostedtothetriggeringitemwith

thesubitemfortemporaltranslationdifferencesoftheAPC(105).

2. FSitemsetofthetransferredasset,restrictedtothesubitemfortheopening

balance of the cumulated value authorizations. The difference is posted

tothetriggeringitem. Subitemfortemporal translationdifferencesof the

cumulated amortization (205).

3. FSitemsetofthetransferredasset,restrictedtotheremainingsubitems. The

difference is posted to the item for translation differences from currency

translations.

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Unit4: CurrencyTranslation AC660

Figure50: TreatmentofDifferencesNotAffectingNetIncome

WhentheFSitemsoftheannualstatementofaccountsarenotcalculatedwitha

standardexchangerate,currencytranslationdifferencesoccur. Thesedifferences

canbepostednotaffectingnetincomeoraffectingnetincome.

Not affecting net income:

Both balance sheet and income statementdifferences that arise from currency

translationareallocated,withinthebalancesheet,withanownerequityitem.

Youcandeterminehowyouwantnetincomeandretainedearningstobeaffected.

To do this, you select certain differential items for the translation item sets in

the translation method.

Typically, only the translation differences in thebalance sheet are posted with

an effect on net income and retained earnings. In US GAAP accounting, the

differencesintheincomestatementarepostedbacktothebalancesheet.

Translationdifferencesintheincomestatementaretypicallypostedtoanincome

statementitem. Thedifferencesaffectneithernetincomenorretainedearnings.

Youalsohavethefollowingoptionsforpostingtranslationdifferences:

Post with subitems.

Breakdowndifferencesbypartnerunitortransactioncurrency.

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AC660 Lesson: Translation and Rounding Differences

Figure 51: TreatmentofDifferences Affecting NetIncome

In the Customizing of translation methods, if you define that balance sheet

currencytranslationdifferencesaretobepostedtoitemsintheincomestatement,

an imbalance occurs in the balance sheet and the income statement, from the

posting. Thisfinancialstatementimbalanceshouldnormallyflowintotheannual

net income and retained earnings.

Whenpostingtranslationdifferenceswithaneffectonnetincome,youwantto

differentiatebetweentranslationswithinthefirsttranslationaffectingnetincome

andthetranslationaffectingnetincomeinsubsequentperiods.

Duringfirsttranslation, theentiretranslationdifferenceispostedwithaneffect

on net income.

Duringsubsequenttranslations,onlythechangeinthetranslationdifferencesince

thefirsttranslationcanbepostedwithaneffectonnetincome.

Inthesystem,adifferentiationbetweenthefirstandsubsequenttranslationwith

an affect on net income is made by means of selected items. The system uses

thisselecteditemtostorethetranslationdifferencesfromthefirsttranslation. In

subsequenttranslations,itcalculatesthechangeintranslationdifferencesinternally

andpoststhisamount. Youspecifyselecteditems,suchasthestatisticalitemfor

currencytranslationaffectingnetincome,inthesectiontranslationCustomizing.

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Unit4: CurrencyTranslation AC660

Figure 52: Example for Different Translations

Assets:

Inthisexample,theFSitemsofthefixedassetsaretranslateddifferently:

Theacquisitioncostisestimatedwiththeavailablevalueingroupcurrency,and

mid-yearacquisitionsaretranslatedatthecurrentexchangerate.

Receivablesaretranslatedatthecurrentexchangerate.

Liabilities and Equity:

Thecommonstockisestimatedwiththehistoricalvalueaccordingtothechanges

in investee equity.

Retainedearningsaretranslatedatthecurrentexchangerate.

Thetotaldifferenceof100-betweenthetranslationusingthereferenceexchange

rateandtherespectivespecialexchangerateisclearedinthecurrencytranslation

differenceitemon the liabilitiesand equityside.

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AC660 Lesson: Translation and Rounding Differences

Figure53: TotalsDatabase-TemporalTranslationDifferencesRecord

Youcancalculatethetemporaltranslationdifferencesforitemswithoutsubitems,

asthecurrencytranslationindicatortakesonthefunctionofasubitem.

Forcurrencytranslationusingthecurrencytranslationkeyattheperiodendrate

(both 9 and 7), you can calculate temporal translation differences. Up to four

databaserecordsaregeneratedinlocalcurrencyfromonedatabaserecordingroup

currency. Thisisspecifiedinthemethodentriesandseparatelystoredinthetotals

database using the translation indicator.

Theaboveexamplepresentstherecordswiththetranslationindicator0(originalr

ecord)and2. Thetemporaltranslationdifferencebetweentheoldandthenew

referenceexchangerateisshownhereforthepriorperiodvalue.

Ifyoudonotactivatethetemporaltranslationdifferenceindicator,thefollowing

records of currency translation appear:

Originalrecord(translationindicator 0): Showsthetransactionperiodvaluein

localcurrencyandthereferencevalueingroupcurrency

Whenthetranslationmethodcontainsanotherexchangerateindicator,theperiod

valueshowsthedifferencebetweenthevalueingroupcurrencyandthetransaction

reference value (translation indicator 1)

Indrilldownreports,youcananalyzetheeffectofthecurrencytranslationusing

thecharacteristictranslation,anddisplaythegenerateddatabaserecordsforeach

currency translation key.

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Unit4: CurrencyTranslation AC660

Figure54: AssetHistorySheet: TemporalTransl. Diff. Record

Ifyoutranslateassetvaluesusingthecurrentexchangerateforthecurrentperiod

andnothistoricallybyyearofacquisition,thentemporaltranslationdifferences

occur if the current exchangeratechanges with anew fiscal year. Theclosing

balance for the prior year no longer corresponds to the opening balance of the

current year.

As the asset items are always defined broken down by subitems, you receive

a special record of translation differences using the transaction types for the

currency translation.

Thefollowingsubitems(consolidationtransactiontypes) areusedintheabove

asset history sheet:

105 Opening balancetranslation differences

205 Valueadjustment translationdifferences

100 Opening balance APC

200 Openingbalanceaccumulated depreciation

120 Acquisitions

220 Depreciation

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AC660 Lesson: Translation and Rounding Differences

Figure 55: AssetHistorySheetat Current Rate: Method

Youcanrecordthetranslationdifferenceseparatelyusingthesubitemtransaction

type. To do this, you must make the following entries when you maintain the

currency translation method:

Ref. exchange rate ind.: Current exchangerate

Record closing bal. (APC or VA) prior year:

FortheFSitemsets,fixedassets,andvalueadjustments,specifyasubitemsetfor

OBAPC,OBVA,andasetforalltheothersubitems.

As aresult, only the itemsvalues assignedto thesubitemsOBAPC/ OB VA,

specified in the set are translated.

FixedassetsaretranslatedusingtheexchangerateindicatorCurrentexchangerate.

IfyouselectUseofprioryearratesinthemethodentry,theprioryeartranslation

rate is used.

Thecurrencytranslationpoststhetranslation differencetothetriggering items

with the subitems for translation differences.

Theotheractivities,suchastheacquisitions,retirements,andtransfers,aredefined

inthethirdmethodentry. Thesubitemsetcontainsalltheremainingsubitems.

Rounding Differences

Duringthetranslationofreportdata,onefinancialstatementitemcouldberounded

upwhiletheotherisroundeddown. Thiscouldresultinroundingdifferences.

Inthisexample,theroundingcheckresultsinacentdifferenceontheassetsside,

whichiswhytheroundingdifferenceispostedontheliabilitiesside.

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Unit4: CurrencyTranslation AC660

Rounding Entry for Item Reconciliation

The rounding check is also used for cases in which a difference results from

differentlytranslatedfinancialstatementitemsinthebalancesheet andincome

statement.

Intheprocess, thesystemchecksduringcurrencytranslationwhether financial

statement items that should be identical have different values in the group

currency after translation. The rounding check determines the differences and

posts clearing documents.

The exampleshowsHistorical translation of retained earnings in the balance

sheet over several years. Thisprocedurehasthe effect that ontheonehand in

theincomestatementtheretainedearningsandontheotherhandintheincome

statement theunappropriatedretainedearningsofyear1997inyear1998must

be corrected.

Thelocalbalancesheetwithretainedearningsfor1997and1998appearsinthe

upper left, while the income statement with unappropriated retained earnings

(-1000) and the retained earnings (2000) appears under it. The information is

valid as of December 31, 1998.

Inthemiddleofthescreen,thebalancesheetcontainsthegroupvaluestranslated

atthehistoricalreferenceexchangerate(total -5000).

Theincomestatementwiththeretainedearningsingroupcurrency(6000)appears

in the right of the screen.

The first rounding entry (1000) arises from the difference between retained

earnings/balancesheetandretainedearnings/incomestatement.

Itispostedintheincomestatementwithreverseddebit/creditsign.

Inthiswaytheretainedearningsintheincomestatementarereducedto5000.

Withthisactivitya2nddifferencearisesintheincomestatement.

When transferring the retained earnings into the balance sheet (1998), the

translatedretainedearningsfrom1997(3000) werecarriedforwardtotheitem

Unappropriated retained earnings.

The 2nd rounding entry corrects the item Unappropriated retained earnings

(1000).

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AC660 Lesson: Translation and Rounding Differences

Figure 56: Rounding Differences

The translation of financial data can produce differences that are caused by

roundinginthesystem. Thesedifferencesarenotrelatedtotranslationdifferences.

Ifroundingdifferencesoccur,translatedfinancialdatadoesnotpasssubsequent

validationchecks,suchasTotalassets=Totalliabilitiesandequity.

Thesystemcalculatesthesedifferencesandpoststhemtothedifferentialitems

that you specify in rounding entries.

For the definition of rounding entries, the following three possibilities are

available:

• Using an item set.

– The values of items in this set must equal zero when added. For

example,thecorrespondingvalidationcheckswhetherthesumofall

the balance sheet items is 0.

• Usingtwoitemsets,checkwhetherthesumofitemsinthefirstset,suchas

thenetincomeandappropriationofretainedearnings,isequaltothesumof

itemsinthesecondset,suchastheretainedearningsinthebalancesheet.

• Using two item sets, the first of which is restricted to a set of subitems,

checkwhetherthesumofvaluesfor thesubitemsspecifiedinthefirstset

andthevaluesfromthesecondsetequalzero. Thefirstsetcancontainfixed

assetitemsrestrictedtodepreciationentries,andthesecondsetcancontain

depreciationexpenseitemsintheincomestatement.

Note: Whenyouspecifyasequenceforroundingentries,ensurethat

no entry invalidates an entry positioned earlier in the sequence.

The system only roundsif the criteria in arounding rulearemet

in local currency.

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Unit4: CurrencyTranslation AC660

Figure 57: Rounding Entry for Item Reconciliation

Rounding differences can be used to reconcile financial statement items that

shouldhavethesamevaluesaftercurrencytranslation. Anexampleofthisisthe

retainedearningsitemsinthebalancesheetandtheincomestatementifyouusea

chartofaccountswithappropriationofretainedearningsintheincomestatement

and a reversed debit/credit sign. If you use varying exchange rates, currency

translationcancausedifferencestooccurbetweenthesefinancialstatementitems.

The example shows the historical translation of retained earnings (with the

appropriationofretainedearningsshownintheincomestatement),andtheneed

forroundingofentriesforreconcilingthefinancialstatementitems.

Balance carried forward 2002: carry forward the balance sheet item of the

retainedearnings. Theretainedearningsincomestatementitemiscarriedforward

to the same item in the new year, and with reversed debit/credit sign to the

unappropriatedretainedearningsiteminthenewyear. Inthisway, theincome

statement is cleared in the new year.

CurrencyTranslation: Asaresultofcurrencytranslation,theretainedearnings

(2001)aretranslatedinthebalancesheetatthe2001exchangerate(2.0),andthe

retainedearningsfrom2002aretranslatedatthe2002exchangerate(3.0). Inthe

incomestatement,thetotalretainedearningsaretranslatedatthe2002exchange

rate (3.0).

Itemreconciliationbetweentheretainedearningsitemsinthebalancesheet

and incomestatement: The difference ispostedto the retainedearningsitem

in the income statement with the corresponding debit/credit sign. The second

reconciliation corrects the value of the unappropriated retained earnings item.

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AC660 Lesson: Translation and Rounding Differences

Reconciliation oftheentireincomestatementestablishesadifference of 1,000

units,whichisthenpostedtotheunappropriatedretainedearnings. Thisbalances

the income statement.

Customization of Currency Translation

Customizing Currency Translation

Customizing Currency Translation II

These two graphicsarea summary of the required configuration steps and the

course of currency translation. Please introduce both steps in the following

demonstration.

Figure 58: Customizing Currency Translation

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Unit4: CurrencyTranslation AC660

Figure 59: Currency Translation - Process Flow

Currencytranslationcanbecarriedout“provisionally”or“finally”.

“Provisional” translation is primarily required in order to generate balance

reconciliationlistsingroupcurrencyfortheinteruniteliminationtaskthatfollows.

The type of translation run depends on the system settings and the status of

preceding tasks in the monitor.

The system runs a “provisional” translation, which cannot be blocked in the

following situations.

Ifyouhavedefinedthetranslationmethodandspecifiedexchangerates,however

you have not yet checked and activated the method. Or, if you have not yet

executedthetaskforvalidatingreportedfinancialdataand/ornotblockedthistask.

Boththe“provisional”and“final”translationcanbererunifthereporteddatais

subsequentlymodified. Previouslycalculatedvaluesaresimplyoverwrittenwith

newones. Restrictionsexistwiththereferenceexchangerateindicator“*”.

Demonstration: Currency Translation

Purpose

Demonstrate currency translation

System Data

System:

Client:

UserID:

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AC660 Lesson: Translation and Rounding Differences

Password:

Setupinstructions:

1. Demonstratethecustomizingforcurrencytranslation.

2. Startthecurrencytranslationtaskinthedatamonitor.

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Unit4: CurrencyTranslation AC660

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AC660 Lesson: Translation and Rounding Differences

Exercise 9: Currency Translation

171

Exercise Duration: 10 Minutes

Exercise Objectives

After completingthisexercise, youwillbeableto:

• DefineacurrencytranslationmethodExecutethetaskcurrencytranslationin

the data monitor

Business Example

The consolidation unit D reports itsdata inthelocal currency EUR. After you

define andassignatranslationmethod,demonstratecurrencytranslationusing

the consolidation unit D as an example.

Task:

Translation method

1. Translation entries

Define the translation method XY-01 (where XY stands for the chart of

accounts)usingreferenceexchangerateindicator5(=currentrate).

Hint: Thesetsyouneedbeginwiththeletterforyourgroup(Afor

group 01, etc.) and ahyphen (X-...).

Example:

Group 01: Set A-

Group 10: Set J-

Group 18: Set R-

ThesuffixconsistsoftheFSitemnumber,thesubitem,orthefrom

FS item number.

Makethefollowingsettingsinthemethod: Enterthefollowing:

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Unit4: CurrencyTranslation AC660

Field/Data Type Value

Translation entry 010:

FS Item Set: From: 191500

X-191500FixedAssets

Subitem set: From: 100

X-100OpeningBalances

Translation key 6

Translationdifferences:

Item (debit/credit) 250910

Subitem category 6

Subitem 120

Translation entry 020:

FS Item Set:

X-191500FixedAssets

Subitem Set: From120to299

X-999FixedAssetMovements

Exchangerateindicator 5

Translation key 1

Translationdifferences:

Item (debit/credit) 250910

Subitem category 6

Subitem 120

Translation entry 030:

FS Item Set: From170100to170400

X-170100Investments

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224

Field/Data Type	Value
Translation entry 010:
FS Item Set: X-191500FixedAssets	From: 191500
Subitem set: X-100OpeningBalances	From: 100
Translation key	6
Translationdifferences:
Item (debit/credit)	250910
Subitem category	6
Subitem	120
Translation entry 020:
FS Item Set: X-191500FixedAssets
Subitem Set: X-999FixedAssetMovements	From120to299
Exchangerateindicator	5
Translation key	1
Translationdifferences:
Item (debit/credit)	250910
Subitem category	6
Subitem	120
Translation entry 030:
FS Item Set: X-170100Investments	From170100to170400

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AC660 Lesson: Translation and Rounding Differences

Field/Data Type Value

Translation key 3

Translation differences:

Item (debit/credit) 250920

Subitem category 6

Subitem 120

Translation entry 040:

FS Item set: From: 250100

X-250100CommonStock

Translation key 4

Translation differences:

Item (debit/credit) 250930

Subitem category 6

Subitem 120

Translation entry 050:

FS Item Set From100000to170099

X-299999 BS-Investments- From170401to191499

MachEquip-CommonStock

From191501to250099

From250101to299999

Exchange rateindicator 5

Translation Key 1

Translation differences:

Item (debit/credit) 250940

Subitem category 6

Subitem 120

Transaction Currency Checkthedefaultbox

Translation entry 060:

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225

Field/Data Type	Value
Translation key	3
Translation differences:
Item (debit/credit)	250920
Subitem category	6
Subitem	120
Translation entry 040:
FS Item set: X-250100CommonStock	From: 250100
Translation key	4
Translation differences:
Item (debit/credit)	250930
Subitem category	6
Subitem	120
Translation entry 050:
FS Item Set X-299999 BS-Investments- MachEquip-CommonStock	From100000to170099 From170401to191499 From191501to250099 From250101to299999
Exchange rateindicator	5
Translation Key	1
Translation differences:
Item (debit/credit)	250940
Subitem category	6
Subitem	120
Transaction Currency	Checkthedefaultbox
Translation entry 060:

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Unit4: CurrencyTranslation AC660

Field/Data Type Value

FS Item set: From300000to389999

X-389999IncomeStatement

Exchangerateindicator 6

Translation key 5

Translationdifferences:

Item (debit/credit) 250930

Subitem category 6

Subitem 120

Translation entry 070:

FS Item Set From: 390000

X-299999 BS-Investments-

MachEquip-CommonStock

Exchangerateindicator 6

Translation key 5

Translationdifferences:

Item (debit/credit) 251200

Subitem category 6

Subitem 120

2. Rounding rules

Definethefollowingroundingrulesinthesequencelisted:

-Annualnetincomeinthebalancesheetandincomestatement: differential

item251200RetainedEarnings-CurrentYear,subitem120Additions

- Balance sheet

-Differentialitem250950CurrencyTranslationAdjustments-Rounding,

subitem 120 Additions

- Income statement

-Differentialitem321300CurrencyTranslationDifference,I/S

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226

Field/Data Type	Value
FS Item set: X-389999IncomeStatement	From300000to389999
Exchangerateindicator	6
Translation key	5
Translationdifferences:
Item (debit/credit)	250930
Subitem category	6
Subitem	120
Translation entry 070:
FS Item Set X-299999 BS-Investments- MachEquip-CommonStock	From: 390000
Exchangerateindicator	6
Translation key	5
Translationdifferences:
Item (debit/credit)	251200
Subitem category	6
Subitem	120

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AC660 Lesson: Translation and Rounding Differences

Field/Data Type Value

Translation Entry 010:

From: 191500

FS Item Set:

X-191500 Fixed Assets

From: 100

Subitem set:

X-100Opening Balances

Translation key 6

Translation differences:

FS Item (debit/credit) 250910

Subitem category 6

Subitem 120

Translation Entry 020:

FS Item Set:

X-191500 Fixed Assets

From 120 to 299

Subitem Set:

X-999FixedAssetMovements

Exchange rateindicator 5

Translation key 1

Translation differences:

Item (debit/credit) 250910

Subitem category 6

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227

Field/Data Type	Value
Translation Entry 010:
FS Item Set: X-191500 Fixed Assets	From: 191500
Subitem set: X-100Opening Balances	From: 100
Translation key	6
Translation differences:
FS Item (debit/credit)	250910
Subitem category	6
Subitem	120
Translation Entry 020:
FS Item Set: X-191500 Fixed Assets
Subitem Set: X-999FixedAssetMovements	From 120 to 299
Exchange rateindicator	5
Translation key	1
Translation differences:
Item (debit/credit)	250910
Subitem category	6

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Unit4: CurrencyTranslation AC660

Field/Data Type Value

Subitem 120

Translation Entry 030:

From170100to170400

FS Item Set:

X-170100 Investments

Translation key 3

Translation differences:

Item (debit/credit) 250920

Subitem category 6

Subitem 120

Translation Entry 040:

From: 250100

FS Item set:

X-250100CommonStock

Translation key 4

Translation differences:

Item (debit/credit) 250930

Subitem category 6

Subitem 120

Translation Entry 050:

FS Item Set From100000to170099

X-299999 BS-Investments-MachEquip- From170401to191499

Common Stock

From191501to250099

From250101to299999

Continued on next page

228

Field/Data Type	Value
Subitem	120
Translation Entry 030:
FS Item Set: X-170100 Investments	From170100to170400
Translation key	3
Translation differences:
Item (debit/credit)	250920
Subitem category	6
Subitem	120
Translation Entry 040:
FS Item set: X-250100CommonStock	From: 250100
Translation key	4
Translation differences:
Item (debit/credit)	250930
Subitem category	6
Subitem	120
Translation Entry 050:
FS Item Set X-299999 BS-Investments-MachEquip- Common Stock	From100000to170099 From170401to191499 From191501to250099 From250101to299999