It's in my certification guide book, but it doesn't explain what's it used for. It's 4 characters and a description, it is then assigned to a ledger group, but what does it control?
When you create valuation areas for foreign currency valuation, these are assigned to an accounting principle. And via assignment of accounting principle to ledger group, the system knows in which ledger(s) to post the unrealized exchange rate differences.
A company may have to report both in a Local Accounting Principle (company's country accounting regulations) and in an International Accounting Principle (IFRS). To do this, parallel valuation is needed, in this case with different Ledgers (Ledger Groups). So you have Ledger A which is assigned to a Local Accounting principle and using Ledger Group transactions you can post only to Ledger A for specific transactions that should be posted with a Local Accounting Principle. Similarly you can post to Ledger B which is assigned to IFRS for specific IFRS transactions.
Hope this is clear.