FX Revaluation for Balance sheet account – how does it matter with different account assignment approaches.

 

FX revaluation program (FAGL_FCV) always reverse postings for vendor, customer, open items valuations unless the delta setup is in place.

Without delta posting, for balance sheet account, there are some points need to be considered carefully.

For B/S Account balance revaluation, it is possible to use the original account or another separate account as balance sheet adjustment.

The setup of “Balance sheet Adjustment account” (in OBA1) has different implications on the selection of the field “Reverse Postings” while executing FAGL_FCV.

1. In case, the balance sheet adjustment account is a separate account, it is important that user selects “Reverse Postings” for Balance Sheet revaluation.

Below is sample postings for the scenario when user select “Reverse Postings”.

In this scenario, total amount on asset side at the end of April is 100+20-20+30 = 130, which is equal to value of 100USD at FX rate 1:1.3 at the end of April.

When user doesn’t select the indicator “Reverse Postings”:

There is no reversal postings and also system doesn’t consider that previously no reversal has been made. It just post the new valuation.

In this scenario, total amount on asset side at the end of April is 100+20+30 = 150, which is the expected value of 100USD at FX rate 1:1.3 at the end of April. This will cause a serious issue over the time. Imagine the issue is detected only after 1 or 2 years.

1. In case, the balance sheet adjustment account is the same as the original valuation account, it doesn’t matter if you select “Reverse Postings” while running or not. At the end of the day, you have same figures on your B/S and PL report.

 

As above scenarios when using the original valuation account as B/S adjustment account, at the end of April, local balance of the bank account is 130 for both scenarios which is expected. It is because the program already compare new valuation amount and compare with current balance, which included previous valuation in March (2a).

 

In conclusion, when using original account as adjustment account, it doesn’t matter whether user select the field or not. When using separate adjustment account, it is required to select “Reverse Postings” for balance sheet revaluation. However, it is expected that user normally forget some input field unless there is clear prompts validating their parameters real time. This is not possible in the real world. So it is recommended to use original account as adjustment account in configuration to eliminate user mistake.