Foreign Currency Transactions (Oracle Payables Help)


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Foreign Currency Transactions

You can enter all types of invoices, including prepayments, expense reports, and recurring invoices, in a foreign currency and then pay them in that currency.

Note: If the invoice currency is a fixed-rate currency such as Euro or another EMU currency, you can pay an invoice in an associated fixed-rate currency. See: Cross Currency Payments for Fixed-Rate Currencies.

When you enter an invoice, Payables uses the exchange rate you select to convert the invoice distributions into functional currency. You define your functional currency during setup for your set of books. When you create a payment for a foreign currency invoice, Payables uses the exchange rate you enter at that time to convert the payment distributions into your functional currency. Any difference in functional currency between invoice entry and invoice payment is recorded as realized Gain/Loss.

When you reconcile your payments using Oracle Cash Management, Payables also creates Gain/Loss accounting entries to record differences between the original payment amount and the cleared payment amount due to exchange rate fluctuations. See also: Reconciling Payments with Oracle Cash Management.

When you create journal entries for your invoices and payments, Payables transfers journal entries with both your functional and foreign currency to the General Ledger.

To make a foreign currency payment, use a bank account with a payment document that uses a payment format that is either multi-currency or defined for the foreign currency.

Figure 1 - 9 shows the general steps you follow to enter and pay a foreign currency invoice.

System Setup for Multiple Currency

Currencies Window

Defining Sets of Books

Payables Options

Enable the Allow Multiple Currency Payables option.

Enable the Require Exchange Rate Entry Payables option for foreign currency invoice entry. (optional)

Define a default exchange rate type which defaults to all foreign currency invoices. (optional)

Define a default invoice and payment currency which defaults to all supplier sites you enter. (optional)

Defining Conversion Rate Types

Entering Daily Rates

Defining Banks

Entering Invoice Currency

You can pay invoices only in the same currency you used to enter them. You can enter or change invoice currency defaults at five subsequent times. During each of these steps you can override the default created by the previous step.

Payables Options, choose default invoice currency

Supplier Entry

Supplier Site Entry

Invoice Batch defaults (optional)

Invoice or Expense Report Entry

The invoice currency is the default for invoice distributions, and this invoice distribution currency default cannot be changed.

Making Foreign Currency Payments

To pay foreign currency invoices you must have bank accounts and payment documents that are defined for foreign currency payments. You must use one of the following combinations:

A foreign currency bank account with a payment document that uses a payment format defined for the intended foreign currency.

A multi-currency bank account with a payment document that uses multi-currency payment format. If you use a multi-currency payment format, you enter the payment currency at payment time.

A multi-currency bank account with a payment document that uses a payment format defined for the intended foreign currency.

Gain/Loss

Payables tracks currency gains and losses in your functional currency caused by exchange rate fluctuations between the times of invoice entry, payment creation, and payment reconciliation with Cash Management. For example, a U.K. company enters an invoice to pay a U.S. company 100USD at a .63 exchange rate. At payment time, the exchange rate is .62. Payables records the 1UKS gain realized when the invoice payment amount, expressed in functional currency, went from an estimated 63UKS to 62UKS.

Any time after you enter invoices and before payment, you can review your unrealized gain/loss by submitting the Unrealized Gain/Loss Report.

Types of Exchange Rate Entry

You cannot pay or create journal entries for foreign currency invoices that have no exchange rate, and you cannot create journal entries for foreign currency payments that have no exchange rate. You enter exchange rates when you enter invoices and when you create payments.

You can enter the exchange rate manually, or Payables can enter the exchange rate automatically if you have defined in the GL Daily Rates table a rate that matches the invoice's currency, exchange rate type and exchange rate date. You can assign an exchange rate to a transaction in three ways:

Manual. During invoice entry or payment creation you manually enter the exchange rate. See: Manual Exchange Rate Entry

GL Daily Rates Table Default. During invoice entry or payment creation, Payables automatically enters the exchange rate from the GL Daily Rates table. See: GL Daily Rates Table Default.

AutoRate. After you have entered invoices or created payments without exchange rates, ensure that the GL Daily Rates table contains the exchange rate information you need and submit the AutoRate program. Payables automatically assigns exchange rates from the GL Daily Rates table to invoices and payments requiring them. See: AutoRate Program

Types of Exchange Rates

Payables uses five types of exchange rates. Payables uses exchange rates to convert invoice and payment amounts into your functional currency.

User. Used to manually enter your own exchange rate during invoice entry or at payment time.

Spot. A daily exchange rate which is a quoted market rate. When you specify a Spot rate type, Payables automatically enters the invoice Exchange Rate from the GL Daily Rates table.

Corporate. A standard market rate determined by senior management for use throughout your organization. When you specify a Corporate rate type, Payables automatically enters the invoice Exchange Rate from the GL Daily Rates table.

User-defined. An exchange rate type you define in the Define Daily Conversion Rate Types window. You can define as many exchange rate types as you need. When you specify a User-defined rate type, Payables automatically enters the invoice exchange rate for you from the GL Daily Rates table.

EMU Fixed. If you use fixed-rate currencies and your functional currency is different from the Invoice Currency or Payment Currency, and the currencies are associated fixed-rate currencies, such as Euro and another EMU currency, Payables displays EMU Fixed as the Rate Type and you cannot update this value.

Reporting on Foreign Currency Transactions

Submit the following reports to review foreign currency information:

Posting Hold Report: Lists invoices Payables is unable to post. Report includes foreign currency invoices with no exchange rates, unbalanced distributions, etc. See: Posting Hold Report.

Unrealized Gain / Loss Report, and Realized Gain / Loss Report: Lists gains and losses in functional currency due to changes in exchange rates. See: Unrealized Gain/Loss Report.

Cash Requirement Report: Forecasts cash needs for payment of invoices that match parameters you enter. See: Cash Requirement Report.

Integration with Other Oracle Applications

Payables is fully integrated with all other Oracle Applications. For example, if you define currencies, exchange rate types and exchange rates information in Oracle General Ledger, you do not need to enter the same information in Payables.

FOREIGN CURRENCY RESTRICTIONS:

EXCHANGE RATE REQUIRED: If a foreign currency invoice has no exchange rate, Payables will apply a hold to the invoice and will not pay or create journal entries for it. You can review the Posting Hold Report to see all the invoices Payables will not post. If a foreign currency payment has no exchange rate, Payables will not create journal entries for it and will list it on the Posting Exception Report and the General Ledger Audit/Exception Report. These reports print automatically after you submit the Payables Transfer to General Ledger program.