What is Exchange Rate Revaluation and how does it impact B/L items and P/L

Question

Dear All,
Can Any one please guide in the sense how a foreign currency revaluation impacts balance sheet and P/L items. ALso why do we need at all to do Foreign Currency Revaluation.
Pinee

Answer 1

Hi Pinee,
At month-end Balance Sheet accounts containing balances expressed in a transaction currency different from the Company Code base currency have to be revaluated at the ongoing exchange rate.
In relation to pure GL entries the automation of exchange rate revaluation is reached via the proper usage of:
•Foreign currency GL balance sheet accounts.
GL accounts can be managed and run in a foreign currency
For a GL account in a foreign currency the account balance existing at period end is revaluated at the month-end rate.
The only accounts managed in foreign currency in the GL will typically be the Bank accounts denominated in a currency different from the Company Code base currency.
•Open Item managed GL balance sheet accounts
In the case a GL account is defined as “Open Item managed” the system tracks each single Item posted, marking it as open or cleared.
An “Open Item GL account” is typically used for accounts containing distinguishable open positions.
The following account categories will be managed as Open Item accounts in the GL:
Loans: Intercompany and Third Party
GR/IR: Clearing account for Goods receipt/invoice receipt
Bank clearing accounts
All the Open Items expressed in a currency different from the Company Code currency are properly revaluated at period-end.
Balance sheet items such as Vendor balances and Customer dues are also revaluated at the month end or year end depending on th requirement.
Regards
Pratiksha
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