Foreign Currency Translation at Year End - How SAP Works for P&L items?

Question

Hi All,
I wanted to know "How SAP works on Foreign Currency Translation at year end" from Local Currency to Group Currency for P&L Items.
I know how SAP works for Balance sheet items but am really confused with when the translation was done for P&L Items.
Configuration:
We are on ECC 6.0 . Local Currency is CAD and we have 2nd Local Currency as "USD - Group Curr".
We have set up Valuation Method - 4
We have set up Valuation Area - 40
For Account Determination for Currency Translation, GL accounts (Loss, Gain and B/S Adj)  were setup for the combination of Chart of Accounts, Val Area and Fin Stmt Ver.
Sales Account Balance
CAD (LC)        USD (2nd LC)       
1000                   920                        
Using tcode "FAGL_FC_TRANS", we translated our P&L items.
Local Currency is CAD and Group Currency is USD.
CAD 1000 and USD 920 are cumulative balances over a period of time.
Since at the end of year CAD became stronger, exchange rate is 1.11 as an example
Sales Account Balance
CAD (LC)        USD (2nd LC)        Translated Value in USD
1000                   920                        900
System passed the following entry in USD:
Debit Balance Sheet Adj A/c 20
Credit Translation Gain / Loss A/c 20
Here are the questions:
1. How does over all translation work? - Should we get any Gain / Loss and have an effect on P&L when all accounts (P&L, B/S) are translated?
2. How can there be a gain entry when USD value has really fallen from 920 to 900 in the current case.
Thanks for your time.
Vijay

Answer 1

Hi,
I had this issue too.  The entry was just opposite to what it should be.  I just flipped the accounts in table FAGL_T030TR.
Example: 410000 is sales account which normally should have a credit balance.  Here are some entries that were posted to sales in 03/2009 and I am running FAGL_FC_TRANS at the end of the month.
March 1, 2009 Cr. Sales CAD 1000- USD 900-
March 2, 2009 Cr. Sales CAD  500- USD 480-
During FC translation transaction, system takes the balance in the account for the period (if you execute it with 'Val. period balance only' checkbox checked) and not the cumulative balance.  SAP recommends translating period balance only (and not cumulative balance) for P&L accounts.  It sees a balance in LC (this again depends on the config. you have in OB22 - whether the indicator is 1 (TC as source currency) or 2 (LC as source currency for translation)) which is 1500, converts that at month end rate.  After conversion, lets say the balance is 1400-.
In this case, we expect a credit entry on sales account
March 31, 2009 Cr. Sales CAD 0  USD 20-
But system was just posting the opposite.  I then flipped the accounts in FC translation configuration.  I know it is misleading.  In that configuration, system says balance sheet adjustment account, but what you should actually give there is your gain/loss account.  Our gain/loss a/c. falls in the same GL account range as the main account.  For example, for 410000, it is 410999 and for 510000, it is 510999.  We report accounts 410000 to 410999 in the same node in the FSV.
Pl. feel free to ask further questions about this.  Pl. test in your system and correct me if my above reply is wrong.
Cheers!