Exchange Rate Maintenance
We are going to look at an interesting topic, which is exchange rate maintenance. We’ll see how the exchange rates are maintained in SAP.
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Exchange rates are maintained in SAP so that foreign currency invoices or payment can be posted. See this field here next to amount field, in any screen, you’ll have this small field here to denote the currency of this amount. Okay, normally, it is in our company, Sun. It is defaulted to USD, but you can change to post to other currencies like CAD, Canadian dollar. If you change the currency to Canadian dollar, the system will consider this amount as a Canadian dollar, and then, while posting, it has to convert this 100 Canadian dollars to US dollars. Okay, so in order for the system to convert currency to local US dollars, because our company code currency is US dollars. Our company code currency is also local currency which is in US dollars, so any amount that is entered other than US dollars has to be converted to US dollars while saving. So in order to convert this, the system must know the prevailing exchange rate so that it can use the exchange rate to convert the entered amount to USD. So, how can we maintain this exchange rate for US dollars against various currencies?
There’s a table in SAP called currency exchange rates. Let me show you how you can get this screen. It’s over here. Accounting, financial accounting, general ledger, environment, current settings, enter translation rates.
This is a table where you have to maintain the exchange rates. Okay. So let me explain what is this. This is something like a code. The first column is something like a code, because in SAP, you can actually maintain different sets of exchange rates. Let me just explain to you using a diagram. I’ll pause this for a moment. Okay, let’s look at this. We have M table, 1001 table. This M and 1001, it’s just a key. It’s just a code. It’s just a code given to different sets of exchange rates for the same currency pair. See, the currency pair is the same, USD-GBP, USD-GBP, USD-CAD, USD-CAD, USD-EUR, USD-EUR. It remains the same, but if you look at the exchange rate is different. USD against GBP is 1.20 in the M table and USD against GBP is 1.60 in the 1001 table. So SAP provides an option for us to maintain different rates for the same currency pair. It is called currency pair. These two currencies form a pair, currency pair, so it allows us to create two different exchange rates by using different keys, something like a code. That’s what you are seeing here.
See, this is a code. For 1001 is something like a code. Using that, I can define a rate. Valid from this field, just ignore this, we won’t be using this indirect quotation, normally, we use direct quotation. You can see the two currencies here. It was hidden just now. At this valid form, meaning that, from which date this particular exchange rate quotation is valid. Okay. When you enter a transaction, the system will look at this date, invoice date. If this invoice date is 19/04/2009, it will come and check this table here to see what is the latest rate that is maintained in this table. In this case, the latest is if I go for M, USD-CAD, right, the latest rate that is maintain is 1st of December 1999. After that, there were no rates maintained. I mean for this CAD combination. Of course, there is an entry for 2000, which is later, but this is for Swiss Franc, so we are not supposed to look at Swiss Franc since we entered CAD here. We have to look at this. For all the CAD rates that are entered, the latest is this. There is only one rate maintained, which is on the 1st of December 1999, which is the latest.
For example, if we enter Swiss Franc, then the latest rate is this because this rate entered is later than this, so we’ll see later which rate you’ll pick between these two. Now, we look at the Canadian rate, so let us see whether this 135 rate is maintained. I’m going to enter 100 in CAD, for me to show you the which rate is picked up, I have to go here, local currency. Let’s go here. Okay. It is 0.85 because it’s using the reverse way.
Let me just show you. It’s changing from Canadian dollar to USD, so let me search like this. Canadian to USD, the reverse way. Okay, the reverse way, you can see 0.85, which is maintained on the 8th of January 2006. You can also maintain in the reverse way. See, Canadian to USD, so this rate is shown there. If I maintain in Swiss Franc, let me see. Let me just change to Swiss Franc to see which rate is taken, 79, so let me just confirm this. M, CHF-USD. Yeah, see this, the latest rate is 1st of January 2000. Even though there’s one more rate maintained for Swiss Franc, which is 65 on the 1999, that will not be taken because if you look at this date here, according to this date, the latest rate it is supposed to take is the one that is entered in the 2000. It will not take this, this or this, even though all are maintained for Swiss Franc. Okay. That’s the purpose of valid from.
Then the purpose of the table. Do you understand? Because now M is looking at M table. Let me just show you why it’s looking at M table. Why not 1001? Even though there is an entry here, let me just show you. I go to 1001 instead of M table, Swiss franc, USD. See, I got an entry, 60, 1001, why not it takes a 0.60 cents? Oh sorry, let’s not look at that. Let’s go for Canadian. Alright, let me just show you something. I have a rate of 0.70 cents for Canadian dollars, if I change this and go here, Canadian dollars is taking 0.85. My question now is, why not it takes the 0.70 cents using this 1001 table? Why it’s looking at M table? That’s my question. The reason is, let me just show you. It’s a very good reason. Let me just close this. I don’t need one more session. Alright, see this, financial accounting new, financial global settings, ledger and come here, defined currencies of leading ledger. Okay, you might be wondering what this stuff is all about. We have a separate session for that to explain about the screen, but I have to show you something very briefly here in the screen before that. Okay, you see this company, we have a company called currency, group currency, and hard currency all assigned to Sun company code, so you just look at this session here. See this exchange rate type, what is mentioned here is M, so what we have told the system is that to get the local currency, which is USD, this is called local currency, to get the local currency of USD, always use M table. Don’t use 1001 table.
Okay, this is not used. So based on this setting, the system is always looking up on the M table. That’s the reason it doesn’t look at the 1001 table. The reason for this is because of this setting here. Don’t worry too much about this screen, I’ll explain what is this when we come to that topic later on. Okay, this is just a brief explanation. So now you know why the system doesn’t look at 1001 rates. Always go for M rates.
Canadian dollar to USD, 0.85, so 0.85 is USD here. That’s the reason. So if I post this, the amount will be converted to local currency, USD amount will be $85, if I post this. Let us do a posting. Let me just pause it until it compile and post it. It will take a while. Okay, it’s post now. See this, we need to inspect this document further. Let me just show you, display, no this is not the document, just go to the document list, or let me just go to FB03, own documents, the date today is 18th, so we can also filter by 18th. Okay, that’s how you do it. Oh, it’s 19, right? The reason is my computer’s date is 18, but the SAP’s date is 19th. One day forward.
Okay, this is the document. I need to show you something. This is a hundred dollars. You see the currency code, it’s no longer USD, it’s CAD. This is what we call document currency. It’s also called document currency. Now, if I want to see the USD equivalent of this, all I had to do is just go here, display currency. See this, local currency, let’s go here. So now you see USD, and the amount is 0.85 plus, because of the exchange rate of 0.85. If you want to see the exchange rate, you go here, the add sign, document header, you can see here, the exchange rate, 0.85, and the translation date when it was translated, and the currency pair, Canadian dollar to USD.
This is something important. You can also see the group currency equivalent. Whatever that you are seeing in this popup window is coming directly from the ledger settings that I showed you just now, here. Let us go to Sun. So this first local currency is USD, then second one is group currency, Euro, and third one is hard currency, USD. Hard currency is just the third currency that I normally use. Normally, we just stop it at group currency. We don’t use a hard currency, but you for whatever reason you want to have a hard currency, a third currency, may be in British pounds. It doesn’t really make sense here because our local currency is USD and hard currency also is USD. It doesn’t really make sense. You can use the hard currency if you want to maintain the amounts. If you want to maintain a ledger in a third currency, which could be British pounds. Okay, now the group currency is Euro, let’s look at the values in Euro, 68 Euro.
There’s one more thing I want to tell you. Yeah, if you want to go back to Document Currency, you come back here, come back to the original Document Currency. So at any point in time, we’re talking about three different currencies at max. Document Currency, Local Currency and Group Currency, and Hard Currency is something exceptional. Sometimes, we use Hard Currency. Alright, that’s about it.
You may watch the full course on the following YouTube link
https://www.youtube.com/watch?v=H3znHYLRUAY&list=PLN17Nn94liux88cwVwqbiRQQo1qK4sOdQ&index=76