A foreign currency payment is a payment that is in the foreign (transaction) currency of the voucher. You specify the foreign currency of a payment at the time the payment is entered. When entering a foreign currency payment:
The foreign currency of a payment must be the same as the transaction currency of the voucher.
The base currency of the payment must be the same as the domestic (base) currency of the voucher.
For example, the domestic currency of a voucher is U.S. dollars (USD). The foreign currency payment must be for a company with a base currency code of USD and the payment and the transaction currency of the voucher must be the same. If the bank account is a monetary account, the company currency for the bank account must also be USD. If the company currency for the bank account is different from the base currency of the payment, the system issues an error message.
Prior to writing foreign currency payments, the following setup must be completed:
Assign currency codes to supplier records
Each supplier record contains these currency code fields:
Default Code (CRRP). Currency in which you enter vouchers for the supplier. Can be overriden when entering the voucher. If you leave this field blank, the system uses the currency of the company assigned to the supplier record as the default.
A/B Amount Code (CRCA). Currency in which you track address book amounts for the supplier, including amounts invoiced this year and the prior year. If you leave this field blank, the system uses the value of the Amount Currency Code field if it is specified in the processing options for the Supplier Master program (P04012). Otherwise, it uses the currency code of the company assigned to the Business Unit field on the Address Book Revision form.
Caution: Once you have assigned an A/B Amount Code (CRCA) it CAN NOT be changed or you will have meaningless amounts in the F0401 table because of mixed currencies
Set up currency specific automatic accounting instructions
Multicurrency AAI items are optional and are used to automatically calculate and distribute currency gains and losses to the correct general ledger account. The potential for a currency gain or loss is due to exchange rate fluctuations that occur between either:
The time a voucher is entered and payment is issued (realized gain/loss).
The time a voucher is entered and the end of a period if the voucher is still open (unrealized gain/loss).
Unrealized Gains and Losses - These AAI items define the accounts that the system uses for unrealized gains and losses on foreign currency vouchers that are open at the end of a period:
PVxxx - foreign currency unrealized gain.
PWxxx - foreign currency unrealized loss.
PRxxx - foreign currency unrealized gain or loss offset.
To create an unrealized gain or loss amount, the system compares the amount of the original voucher to the amount of the open voucher (which is revalued based on the exchange rate at the end of the period) and creates a gain or loss for the difference. The system uses the account number assigned to PV and PW to create foreign currency unrealized gains and losses on open vouchers when you run the A/P Unrealized Gain/Loss Report (R04425). The system uses the account number assigned to PR to create foreign currency unrealized gain or loss offsets when you run the A/P Unrealized Gain/Loss Report. The xxx represents the currency code, which is optional, and xxxx represents the value of the G/L Offset field on the voucher.
Realized Gains and Losses - These AAI items define the accounts that the system uses for realized gains and losses on foreign currency payments:
PGxxx - foreign currency realized gain.
PLxxx - foreign currency realized loss.
To create a gain or loss amount, the system multiplies the voucher amount by the difference in the exchange rate between the original voucher and the foreign currency payment. The system uses the account number assigned to PG and PL to create foreign currency gain and loss amounts. The system creates a gain or loss entry when the payment is posted. The xxx represents the currency code, which is optional, and xxxx represents the value of the G/L Offset field on the voucher.
Scope
This document discusses multi currency Automatic Payments and manual payments within Oracle JD Edwards EnterpriseOne Financial system.
Details
Automatic Payments in a Foreign Currency
You can write automatic payments in the foreign (transaction) currency of a voucher by designating a value in Processing Option 4: Payment Currency on the Printing tab of the Create Payment Control Groups (R04570). The values of this option are:
Blank: Pay the vouchers using the currency of the GL Bank Accounts.
1: Pay using the original domestic amount in the domestic currency on the voucher.
2: Pay using the foreign currency on the voucher.
3: Pay in the domestic currency on the voucher, but calculate the current domestic amount as of the payment date.
4: Pay in an alternate currency that is neither the foreign or domestic currency on the voucher.
When paying a voucher in a foreign currency, the system might calculate a gain or loss between the foreign and domestic currency amounts if the exchange rate has changed since the creation of the voucher and the settings on determining the exchange rate used for creating the payment. The exchange rate used for the payment is determined by the processing option on the Currency tab of the Work with Payment Groups (P04571) program:
Processing Option 1: Effective Date - The system uses this date to locate the exchange rate in the Currency Exchange Rates (F0015) table. If left blank, the exchange rate is pulled using the Payment's GL Date.
Processing Option 2: Use Voucher's Rate - If this option is set to 1, the rate on the voucher is used to calculate the amounts for the payment and no gain/loss should result.
Verify the exchange rates specified in the Exchange Rate table (F0015) for the alternate currency to domestic currency and for the foreign currency to the alternate currency.
Verify Automatic Accounting Instructions (AAI) are set up as well. It will calculate currency gains and losses due to exchange rate fluctuations that occur between either:
The time a voucher is entered and payment is issued (realized gain/loss).
The time a voucher is entered and the end of a period if the voucher is still open (unrealized gain/loss).
For payments in an alternate currency, the gain or loss is calculated between the domestic, foreign, and alternate currencies. The system creates a gain or loss entry when the payment is posted.
The gains and losses for alternate currency payments are recorded separately from standard gains and losses and are handled by using different accounts and AAIs. These AAIs are:
PYxxx - alternate currency realized gain. The system creates an entry in the gain account if the amount derived by converting from an alternate currency directly to a domestic currency is greater than the amount derived by converting from an alternate currency to a foreign currency to a domestic currency.
PZxxx - alternate currency realized loss. The system creates an entry in the loss account if the amount derived by converting from an alternate currency directly to a domestic currency is less than the amount derived by converting from an alternate currency to a foreign currency to a domestic currency. The xxx represents the currency code, which is optional, and xxxx represents the value of the G/L Offset field on the voucher to record rounding differences, the system creates an offset journal entry in the account associated with AAI item PY or PZ when the payment is posted.
P7 - defines the alternate currency clearing account used when you post alternate currency payments. The clearing account must be in the same company as the bank account from which the payment is made; must include a business unit, the account cannot be a monetary (currency-specific) account.
Alternate Currency Automatic Payment Process
Follow these steps to create a automatic payment in alternate currency:
In Create Payment Group Control Groups (R04570), on the Printing processing option tab, set the Payment Currency to 4 (Alternate currency amount). Set the Alternate Currency Code processing option to the currency code for the alternate currency.
In the processing options for Work with Payment Groups (P04571), on the Display tab, review the values in the Alternate Currency processing option. Set Display Alternate Currency Amounts to display payment control group (PCG) amounts in the alternate currency. The Alternate Currency Effective Date option allows use of the system date or a specified date for the alternate currency effective date (the alternate currencys exchange rate).
In Work with Payment Groups, the Total Amount to be Processed will appear in the original currency. The header of the R04570 PDF will show the alternate currency code.
Write the payment, the payment amount is calculated based upon the vouchers currency and the alternate payment currency.
The Update function processes the payment into the A/P Matching Document table (F0413) in the alternate currency amounts with the currency code of the alternate currency. In the A/P Matching Document Detail table (F0414) the original voucher is recorded and a gain/loss PG record is created based on the alternate currency rates.
Entering a Manual Payment in an Alternate Currency
To enter manual payments in an alternate currency:
On the Manual Payment Entry form, complete the fields in the header area.
Complete the Payment Amount field, if necessary. Complete this field only if the Enter Payment Amount processing option specifies that you must enter payment amounts manually. Otherwise, leave the field blank and the system calculates the payment amount after you accept the entry.
Enter the currency code of the voucher in the Currency Code field. Do not enter the currency of the alternate currency payment in this field. The default value is the currency code from the supplier record.
Override the value in the Exchange Rate field with a spot rate, if applicable.
Select Pay Items from the Form menu.
On the Select Open Pay Items form, select the pay items to pay in an alternate currency and click Select.
On the Manual Payment Entry form, select Alternate Payment from the Form menu.
On the Alternate Currency Entry form, leave the Alternate Payment Amount field blank.
The system calculates the payment amount automatically after you complete the remaining fields on the form and click OK.
Complete the Alternate Currency Code field.
Complete these fields only if you entered a spot rate:
Alternate to Domestic
Foreign to Alternate
Note: The default exchange rates are retrieved from the F0015 table. You cannot enter an exchange rate in either of these two fields if triangulation is set up and the Allow Spot Rate check box for the currency relationship is cleared on the Revise Currency Exchange Rates form.
Click OK. To review the alternate payment amount and exchange rates, select Alternate Payment from the Form menu.
Click Cancel.
On the Manual Payment Entry form, verify the foreign currency amounts for the pay items selected. The system does not display the alternate currency amount on this form.
To select additional pay items:
If the processing option is set for the system to automatically calculate the payment amount and you want to select additional pay items, do not clear the Payment Amount field on the Manual Payment Entry form. Instead, choose Pay Items from the Form menu and select additional pay items on the Select Open Pay Items form. The system returns you to the Manual Payment Entry form, where it recalculates the payment amount to include the pay items that you just added.
If the processing option is set for you to enter the payment amount manually and you want to select additional pay items, clear the Payment Amount field on the Manual Payment Entry form. Select Pay Items from the Form menu and select additional pay items on the Select Open Pay Items form. On the Manual Payment Entry form, enter the new payment amount.
On Manual Payment Entry, click OK to accept the entry.
Process Realized Currency Gain and Loss
Exchange rate currency gains and losses are based on exchange rate fluctuations that occur on transactions in a foreign currency. There are two types of gains and losses:
Realized gain and loss: Calculated when there is a difference in the exchange rate at the time when the voucher was created and when the payment is created. This type of gain and loss is created during payment entry.
Unrealized gain and loss: Calculated on open vouchers or invoices at the end of each fiscal period. This type of gain and loss will give an accurate picture of the company's cash position.
Realized Gain/Loss on Foreign Currency Voucher and Payment Example
A European company enters a voucher in Canadian Dollars (foreign currency) and pays the voucher in Canadian Dollars (foreign currency). At the time the voucher is entered:
Foreign value voucher is 1000 CAD.
Domestic value voucher is 700 EUR.
Exchange rate is 1 CAD to 0.70 EUR.
At the time the payment is made, the exchange rate between CAD and EUR has changed:
Exchange rate is 1 CAD to 0.72 EUR.
Foreign value payment is 1000 CAD.
Domestic value payment is 720.
Gain/Loss is -20 EUR. A loss of 20 EUR is created.
Realized Gain/Loss on an Alternate Currency Payment Example
A British company enters a voucher in US Dollars (foreign currency) and pays it in Euro (alternate currency). At the time the voucher is entered:
Foreign value voucher is 100 USD.
Domestic value voucher is 200 GBP.
Exchange rate is 1 USD to 2 GBP.
When the payment is made in EUR (alternate currency):
Exchange Rate is 1 USD to 5 EUR.
Payment Amount is 500 EUR.
The first Gain & Loss is based on the fluctuation of exchange rates between the voucher and the payment. This is the same Gain & Loss that would have been realized if the voucher had been paid in USD.
Exchange Rate is 1 USD to 3 GBP.
Domestic value payment is 300 GBP.
Gain/Loss is -100 GBP. A loss of 100 GBP is created.
The Alternate currency gain/loss is an amount based on the exchange rate differences between the alternate (payment) currency and the domestic currency. The amount calculated by converting the alternate currency payment directly to the domestic currency.
Exchange Rate is 1 EUR to 0.75 GBP.
Domestic value payment in comparison to the alternate currency is 375 GBP.
The Alternate Currency Gain/Loss: is 75 GBP (375 GBP - 300 GBP).
This is the amount that is actually deposited to or paid from the bank account.
Automatic Accounting Instructions (AAI) Setup
The following AAIs are required to calculate Realized Gains/Losses:
PG-Foreign Currency Realized Gain AAI.
PL- Foreign Currency Realized Loss AAI.
PY- Alternate Currency Realized Gain AAI.
PZ- Alternate Currency Realized Loss AAI.
The system uses the same hierarchy for the aforementioned AAIs in determining which AAI item is used:
The AAI item for the document's company with the transaction currency of the payment (e.g. PGxxx where xxx is the currency).
The AAI item for company 00000 with the transaction currency of the payment (e.g. PGxxx where xxx is the currency).
The AAI item for the document's company with the G/L Offset assigned to the voucher (e.g. PGyyyy where yyyy is the offset).
The AAI item for company 00000 with the G/L Offset assigned to the voucher (e.g. PGyyyy where yyyy is the offset).
The default AAI item for the document's company (e.g. PG).
The default AAI item for company 00000 (e.g. PG).
A rounding difference can occur when converting amounts between a foreign and a domestic currency, or an alternate and a domestic currency. The rounding difference, which is immaterial, occurs when the domestic currency amount applied to a voucher is dissimilar as the domestic currency amount of the payment. The system records rounding differences with an offset journal entry in the account associated with AAI item PY or PZ when the payment is posted.
The Alternate Currency Clearing Account tracks the conversion from the payment amount to the original voucher amount and provides an audit trail of the offset amounts for:
The original foreign currency voucher and the domestic side of the foreign currency voucher.
The alternate currency payment and the domestic side of the alternate currency payment.
AAI item P7 defines the Alternate Currency Clearing Account used when posting alternate currency payments. The alternate currency clearing account will balance on the domestic side, but not on the foreign side because it contains multiple currencies.
Requirements for AAI item P7:
The account must be in the same company as the bank account from which the payment is made.
It must include a business unit.
It cannot be a monetary (currency-specific) account.
The system uses the following hierarchy to retrieve the AAI:
The default AAI item for the document's company (i.e. P7).
The default AAI item for company 00000 (i.e. P7).
Unrealized Currency Gains and Losses (R04425)
Exchange rate currency gains and losses are based on exchange rate fluctuations that occur on transactions in a foreign currency. There are two types of gains and losses:
Realized gain and loss: Calculated when there is a difference in the exchange rate at the time when the voucher was created and when the payment is created. This type of gain and loss is created during payment entry.
Unrealized gain and loss: Calculated on open vouchers at the end of each fiscal period. This type of gain and loss gives an accurate picture of the company's cash position.
Note: The A/P Unrealized Gain/Loss Report (R04425) calculates unrealized gains and losses and should be ran at the end of each fiscal period.
Running the A/P Unrealized Gain/Loss Report
When the A/P Unrealized Gain/Loss Report (R04425) runs, the system:
Revalues open foreign vouchers.
Analyzes unrealized gains and losses in detail.
To record unrealized gains and losses on open vouchers, the user has the option to either create a journal entry manually or have the system create one automatically when running the A/P Unrealized Gain/Loss Report (R04425). When the system does so automatically, it assigns a document type of JX for the journal entry and creates only one per company.
Caution: To avoid duplicate journal entries, run the A/P Unrealized Gain/Loss Report (R04425) only once per fiscal period with Processing Option 3: Create Journal Entries set to 1, 2, or 3.
When running this UBE, the system produces a PDF report with the following information:
Base company currency and the transaction currency for each voucher.
Document Number and Due Date.
Original and current domestic amount calculated for each voucher.
Foreign amount of each voucher.
Realized gain or loss if the voucher was paid.
Unrealized gain or loss for each open voucher.
To produce the report, the system uses information from the following tables:
Accounts Payable Ledger (F0411)
Accounts Payable Matching Document Detail (F0414)
It is recommended that there are different batch versions for each individual company with different base currencies because if multiple base currencies are mixed, the foreign grand total and any other subtotals appear as NA (not applicable). Separate batch versions for each specific company also reduces the size of the A/P Unrealized Gain/Loss Report (R04425).
Automatic Accounting Instruction (AAI) Setup
PVxxx: Unrealized Gain Account. This AAI is required for system-generated unrealized gains.
PWxxx: Unrealized Loss Account. This AAI is required for system-generated unrealized losses.
PRyyyy: Offset Account.
Note: As of October 2011: Analyst tested on 8.10, 8.11SP1 and 9.0 releases. If this AAI PR is not setup, the A/P Unrealized Gain/Loss Report (R04425) shows the following: "Error - No Journal Entry Written".
Example Unrealized Currency Gain and Loss
The A/P Unrealized Gain/Loss Report (R04425) program calculates unrealized gains and losses as follows:
The system selects vouchers that are open As of Date that you specify in a processing option and uses an As Of Aging Server to recalculate the domestic and foreign voucher amounts.
Retrieves an exchange rate from the F0015 table, using the as of date specified in a processing option.
Multiplies or divides the original open foreign amount by the exchange rate to compute the new domestic balance.
Compares the new domestic balance with the original domestic balance to calculate the unrealized gain or loss.
Creates the journal entry for the JX Document type as follows:
In case of Gain: Unrealized Gain Account (PVxxxx) Credit Unrealized Gain/Loss Offset Account (PRxxxx) Debit
In case of Loss: Unrealized Loss Account (PWxxxx) Debit Unrealized Gain/Loss Offset Account (PRxxxx) Credit
Base Currency: HKD Transaction Currency: USD Exchange Rate as of 1st January 2014 (USD --> HKD): 10.00000 Exchange Rate as of 31st January 2014 (USD --> HKD): 15.00000
Voucher Details: GL Date: 1st Jan 2014 Foreign Open Amount: 500.00 Domestic Open Amount: 500.00 * 10.00000 = 5000.00
Run A/P Unrealized Gain/Loss Report (R04425) with Exchange Rate Date set to 31st Jan 2014 and it will do following calculations:
Foreign Open Amount: 500.00 Domestic Open Amount (on 1st Jan): 5000.00 Domestic Open Amount (on 31st Jan): 500.00 * 15.00000 = 7500.00
Unrealized Gain/Loss = Domestic Open Amount (on 1st Jan) - Domestic Open Amount (on 31st Jan) Unrealized Gain/Loss = 5000.00 - 7500.00 = -2500.00 (Loss, please note that the Loss Amount would be in negative)
Reversal Journal Entry is created: Document Type = JX Unrealized Loss Account (PWxxxx) = 2500.00 (Debit) Unrealized Gain/Loss Offset Account (PRxxxx) = -2500.00 (Credit)
Note: The reversal JE is created by Debiting the Unrealized Loss Account (positive amount) and Crediting the Unrealized Gain/Loss Offset Account (negative amount). This is vice-versa in case of Unrealized Gain.
Processing Option 1: As Of Date - Activate the As Of functionality. This option is used to determine the status of a transaction on a specific date. If left blank, the system revalues the open foreign transactions in real-time.
Processing Option 2: Exchange Rate Date - The date used to retrieve the exchange rate as configured in the Currency Exchange Rate (F0015) table. This currency exchange rate is used to revalue the open foreign transactions.
Processing Option 3: Create Journal Entries - A journal entry can be created for both gains and losses, only gains or only losses. If left blank, the system does not create a JX journal entry.
Processing Option 4: G/L Date - The G/L date the system uses for any JX journal entries it creates.
Processing Option 5: Batch Status - The batch status the system uses for the JX journal entries it creates.
Processing Option 6: Ledger Type - The ledger type the system assigns to the JX journal entries.
Processing Option 7: Zero Amounts - If the total of the JX journal entry nets to zero, this processing option determines if a journal entry should be created.
Processing Option 8: Hold Payment - This processing option determines if suppliers with a Hold Payment Code set to Y (Yes) should be included in the currency gain and loss revaluation.
Entering a Multi Currency Manual Payment
Steps to enter a multi currency manual payment are as follows:
On Manual Payment Entry (P0413M), complete the fields in the header area as usual.
Complete the Payment Amount field, if necessary. Complete this field only if the Enter Payment Amount processing option specifies that you must enter payment amounts manually. Otherwise, leave the field blank and the system will calculate the payment amount automatically later in the task.
Enter the currency code of the foreign currency payment in the Currency Code field. The default value is the currency code from the supplier record. For a foreign currency payment, you must enter a value in this field so that the system uses the correct exchange rate. The system updates the foreign and domestic side of the voucher.
Override the value in the Exchange Rate field with a spot rate, if applicable. The default exchange rate, which is retrieved from the F0015 table, is the exchange rate between the voucher currency (Currency Code field) and the base company currency (Base field). Note: To view the default currency code and exchange rate now, place the cursor in the detail area of the form. Otherwise, the system will display the default values after you select open items and return to this form.
Select Pay Items from the Form menu.
On Select Open Pay Items, select the pay items that you want to pay in a foreign currency and click Select.
On Manual Payment Entry, verify the foreign currency amounts for the pay items.
To select additional pay items:
If the processing option is set for the system to automatically calculate the payment amount and you want to select additional pay items, do not clear the Payment Amount field on the Manual Payment Entry form. Instead, choose Pay Items from the Form menu and select additional pay items on the Select Open Pay Items form. The system returns you to the Manual Payment Entry form, where it recalculates the payment amount to include the pay items that you just added.
If the processing option is set for you to enter the payment amount manually and you want to select additional pay items, clear the Payment Amount field on the Manual Payment Entry form. Select Pay Items from the Form menu and select additional pay items on the Select Open Pay Items form. On the Manual Payment Entry form, enter the new payment amount.
On Manual Payment Entry, click OK to accept the entry.
Note: When manual payments without a voucher match are posted, the system does not generate a gain-loss record. The system interprets this type of transaction as a voucher and check combination