- SAP Managed Tags
Introduction:
This blog will explore the features of Advanced Foreign Currency Valuation in S/4HANA 2022 On-premise, compare it with Classic Foreign Currency Valuation, detail the necessary configurations, and provide a system demonstration.
Advanced Valuation in Financial Accounting introduces new applications for performing mandatory period-end close activities, ensuring compliance with accounting standards like IFRS9.
Advanced Valuation in Financial Accounting offers its capabilities through apps as well as transaction codes in the backend.
The key features include:
- Discounting of Long-Term Assets and Liabilities
- Advanced Foreign Currency Valuation
- Impairment and Reclassification
S/4 HANA 2022 Advanced Foreign Currency Valuation:
Foreign Currency Valuation is a periodic activity used for month-end postings and reporting, capturing unrealized gains and losses.
In S/4 HANA 2022, advanced foreign currency valuation replaces the classical foreign currency valuation, which is based on the ECC. Advanced foreign currency valuation replaces the classic foreign currency valuation, which is based on the ECC.
It is also supported to be created as a task in Advanced Financial Closing.
Advanced foreign currency valuation can be performed in the functional currency by using different valuation rules; it is performed in the local currency if you haven't set up the functional currency for your company code.
Key Features of Advanced Foreign Currency Valuation
- Delta posting logic; no reversal postings for the exchange difference valuation
- Connectivity between journal entry and original journal entry
- Visibility of valuations per line item.
- Simple Account determination; gain and loss accounts only
- Correction postings for cleared items
- Simplification of customizing and calculations
How to Access Advanced Foreign Currency Valuation in S/4 HANA 2022:
- Schedule General Ledger Jobs with job template - Advanced Foreign Currency Valuation
- In the SAP Easy Access Menu: you can find the new functions under Accounting à Financial Accounting à General Ledger à Periodic Processing à Closing à Advanced Valuation in Financial Accounting à Advanced Foreign Currency Valuation (Transaction FINS_FXV)
Effects on Existing Data: On-premise
As soon as you've carried out the advanced valuation in the productive system and posted data to the system, you can no longer deactivate it for an accounting principle.
In the back end, when you've activated advanced valuation for an accounting principle, and ledgers and company codes in that accounting principle, you can no longer use the following reports:
- Sorted List/Regrouping/Balance Sheet Supplement - OI - Analysis (Transaction: FAGLF101)
- Further Valuations/FI Valuation Run (Transaction: F107)
- Foreign Currency Valuation (Transaction: FAGL_FCV)
Comparison with Classic Foreign Currency Valuation:
Point of Comparison | Classic Foreign Currency Valuation | Advanced Foreign Currency Valuation |
Exchange Rate Difference Posting | Open item valuation postings are made to balance sheet adjustment accounts. | Postings are made directly to the reconciliation accounts. You don't need any balance sheet adjustment accounts for posting. Postings are always made to the account to be valuated. You only have to set up Realized & Unrealized Gain and loss (P&L) accounts.
|
Posting Logic | In Classic Valuation Runs, customers can choose between two posting logics: reversal posting (default) or delta posting. | Advanced Foreign Currency Valuation uses delta posting logic. With the delta posting logic, the difference (delta) of the new valuated amount and the total of the original amount and previous adjustments will be posted. If the exchange rate hasn't changed, no FX effect is posted |
Valuation | In classic foreign currency valuation, valuation area is used. | The Advanced Foreign Currency functionality uses accounting principles, with advanced valuation activated at the Accounting Principle level. |
Simplified Selection parameters & configuration | Classic valuation posting uses various input and processing parameters like valuation area, selection parameters for simulation run, valuation reset, posting parameters, and open item selections for the sub ledger, GL, and balances.
| The Advanced Foreign Currency Program has a simplified input screen with the company code, ledger, key date, and processing option with test run and update run. Refer to the to the configuration steps in the below section.
|
Transaction Code (On Premise) | FAGL_FCV - Foreign Currency Valuation | FINS_FXV - Advanced Foreign Currency Valuation |
Simplified Input Screen:
Configuration:
To activate Advanced Valuation in Financial Accounting and configure the necessary settings, follow path:
SAP Customizing Implementation Guide (IMG) --> Financial Accounting --> General Ledger Accounting --> Periodic Processing --> Advanced Valuation in General Ledger Accounting
Ensure below customizing steps are completed to run Advanced Foreign Currency Valuation.
Financial Statement Version
IMG --> Financial Accounting --> General Ledger Accounting --> Master Data --> G/L Accounts --> Financial Statement Versions --> Define Financial Statement Versions (OB58)
As a prerequisite to run Advanced Foreign Valuation you must have a financial statement version defined.
Add Financial Statement Items for the Reconciliation GL Account
Assign Financial Statement Version to Accounting Principle
IMG --> Financial Accounting --> General Ledger Accounting --> Master Data --> G/L Accounts --> Financial Statement Versions --> Assign Financial Statement Versions to Accounting Principles
Assign the financial statement version that you're using to the accounting principle.
Assign Semantic Tags to Financial Statement Versions
IMG --> Financial Accounting --> General Ledger Accounting --> Master Data --> G/L Accounts --> Financial Statement Versions --> Semantic Tags for Financial Statement Versions --> Assign Semantic Tags to Financial Statement Versions (FINSC_FAGL2SEMTA)
Activate Advanced Valuation in Financial Accounting:
SAP Customizing Implementation Guide (IMG) --> Financial Accounting --> General Ledger Accounting --> Periodic Processing --> Advanced Valuation in General Ledger Accounting --> General Settings --> Activate Advanced Valuation
Activate Advanced Valuation in Financial Accounting for an accounting principle.
Maintain Fiscal Year and Period
Define Rules for Grouping Journal Entry Line Items for Valuation
SAP Customizing Implementation Guide (IMG) --> Financial Accounting --> General Ledger Accounting --> Periodic Processing --> Advanced Valuation in General Ledger Accounting --> General Settings --> Define Rules for Grouping Journal Entry Line Items for Valuation
Define rules that control how the valuation run groups the selected journal entry line items. ( I used SDFT - SAP default for demo)
Define Rules for Advanced Foreign Currency Valuation
SAP Customizing Implementation Guide (IMG) --> Financial Accounting --> General Ledger Accounting --> Periodic Processing --> Advanced Valuation in General Ledger Accounting --> Settings for Advanced Foreign Currency Valuation --> Define Rules for Advanced Foreign Currency Valuation
For demo I used valuation rule SKDV which support Always Valuate FCV valuation Method.
Assign Semantic Tag to FCV Rule
Assign GL Accounts For foreign Currency Valuation
Assign Rules for Advanced Foreign Currency Valuation to Accounting Principles
IMG --> Financial Accounting --> General Ledger Accounting --> Periodic Processing --> Advanced Valuation in Financial Accounting --> Settings for Advanced Foreign Currency Valuation --> Assign Rules for Foreign Currency Valuation to Accounting Principles.
You can create individual valuation rules and use them in individual ledger for the same accounting principle.
If you want to define a rule to be used in all ledgers for the same accounting principle, leave the ledger field empty.
Example:
In the example below, the invoice rate was INR 80/USD. By the time of payment (FC Valuation), the rate increased to INR 85/USD, resulting in a loss of INR 5,000. This means the company had to pay an extra INR 5,000 because of the increase in the exchange rate.
Accounting entry for valuation difference posting:
Unrealized FX Loss 7106133 Dr. 5000
Balance sheet/Reconciliation Account 2000000 Cr. 5000
System Demo:
Step 1: Check and Maintain Exchange Rates (OB08)
Step 2: Post Vendor Invoice in Foreign Currency (FB60/MIRO)
Vendor Invoice is posted in FC USD on 01.08.2024, applicable exchange rate INR 80/USD
Document Number 5000000010/1000/2024
Step 3: Execute Advanced Foreign Currency Valuation (FINS_FXV)
Foreign currency valuation executed with key date 31.08.2024, where the applicable Exch. rate is INR 85/USD.
Functional Currency INR.
Test Run:
Document 5000000010 : Unrealized loss of INR 5000 (80000 -85000) is calculated due to exchange rate fluctuation.
Document 5000000009: Delta difference of unrealized loss of INR 10000 (Invoice @1000*70=70000 - 85000 current valuation) is calculated because previously this document was valued at 75000 (1000*75), so in this run the delta difference of 10000 (70000 - 85000) is considered for posting.
Update Run:
Financial Closing status detail:
ZERDEL : Skipped because there were no changes. This status is set if there is nothing to be valuated or if there was a previous posting in the same period.
POSTED : Document was successfully processed
Step 4: Check Exch. Rate difference Accounting document (FB03)
Accounting document view - Document Currency
Accounting document view - Local currency
Exchange rate valuation difference of 5000 INR is posted to vendor reconciliation account and Unrealized FX Loss GL account.
Best Regards,
Purushottam Arote
