2023-06-25 335608

335608 - Translation of parallel local currencies from

transaction currency or 1st local currency
Version 6 Type SAP Note
Language English Master Language German
Priority Recommendations / Additional Info Category Consulting
Release Status Released for Customer Released On 04.03.2022
Component FI ( Financial Accounting )

Please find the original document at https://launchpad.support.sap.com/#/notes/ 335608

Symptom

Different amounts in local currency and group currency despite identical

currency.
How can this be correct?

Other Terms

Currency translation local currency group currency hard currency parallel

currency
Consolidation DMBE2 DMBE3

Reason and Prerequisites

In financial accounting customizing, you can set the update of documents and
account balances in further currencies in addition to the local currency of the
company code.

When you specify further local currencies, you must specify whether they are to
be directly calculated from the transaction currency or the 1st local currency.
You use one of these methods depending on how you intend to use the further
local currencies. The further currencies can express a combination of currency
and "valuation" , whereby - in this context - the valuation is the perspective
from which you consider a business transaction. This can be the company code,
group, or profit center. The perspective characteristic allows a consideration
of a business transaction from the point of view of the profit center, company
code, or group that is cleaned up of internal business volumes and interim
profits.

A translation from the transaction currency then makes sense only if the update
should take place in an index currency or hard currency. Here, the aim is to
display the business transactions from the original view (from the business
transaction) in a different currency, usually because the national currency is
not sufficiently meaningful due to hyperinflation.

Example: A Brazilian company that uses the US dollar as a hard currency has an
incoming invoice of over USD 1000. The invoice is posted in with a manual
exchange rate of 1.834. The 2nd LC is calculated from the transaction currency
with the exchange rate type M. Since the TC and 2nd LC are identical, the
amounts must also be identical.

TC 1stLC 2ndLC
USD BRL USD

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2023-06-25 335608

-1,000.00 -1,834.00 -1,000.00

The translation from the 1st local currency is also appropriate if the aim of
the update in parallel currencies is to consolidate multiple company codes in a
group. Many accounting principles require that you always start with the local
currency (called "functional currency" in US GAAP) of the company code to be
consolidated during the consolidation of financial statements in a foreign
currency. The 2nd local currency expresses the amounts in the reporting currency
of the group (group currency). Here, we are therefore dealing with the group
view, and not simply with the company code view any longer. As a result, if the
transaction currency and 2nd local currency are identical, different amounts can
result. This seems illogical from a company code view, but it makes sense if you
consider the fact that the 2nd local currency does not depict the company code
view. Instead, it already depicts the translation of the business transaction to
a group view - but " only" the currency translation.

Example: The French subsidiary of a US group with the 1st LC EUR and the 2nd LC
USD has an incoming invoice for USD 1000. The invoice is posted in with a manual
exchange rate of 1.10. The 2nd LC is determined with the exchange rate type M
from the 1st LC with an exchange rate of 1.15. This gives the following values
for the payable:

TC 1stLC 2ndLC
USD EUR USD
-1,000.00 -1,100.00 -956.52

In this case, the deviation between the USD amounts is justified, since the
group translates from EUR using a fixed rule. It does not matter what the
original currency or exchange rate were. The amount in the 2nd local currency is
not consistent with the original business transaction, since the translation
from the 1st local currency depicts a second business transaction with its own
logic for the group. This is the first step in the consolidation.

Solution

The paths for the currency translation must be set accordingly in customizing.
Caution: These changes are only allowed to be made in production systems
directly after year-end closing and before posting to the new fiscal year
starts. Contact your auditors about this.

Other Components

Component Description

CO-PC-ACT Actual Costing

MM-IV Invoice Verification

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2023-06-25 335608

This document refers to

SAP Note/KBA Title

526623 Different handling of local currency and parallel currency in ML

518485 FAQ: Valuation of goods movements

518114 FAQ: Goods movements in foreign currency

430775 MB1B/MIGO - Tax values in foreign currencies

120380 Subsequent activation of multiple valuation approaches/transfer prices in ECC

This document is referenced by

SAP
Title
Note/KBA

MIRO/MIR7: Invoice Verification with manual exchange rate does not have any influence upon LC2
2948075
and LC3 calculation

2185074 How to analyze Currencies values differences

2679832 Error F5063 in T-code:F.13

2298744 Local currency 2, local currency 3 difference

2574252 Additional currencies (LC2, LC3) are missing in program FAGL_FCV - Guided Answers

2542937 Changing currency conversion settings in FINSC_LEDGER

518485 FAQ: Valuation of goods movements

518114 FAQ: Goods movements in foreign currency

120380 Subsequent activation of multiple valuation approaches/transfer prices in ECC

526623 Different handling of local currency and parallel currency in ML

430775 MB1B/MIGO - Tax values in foreign currencies

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