This chapter contains these topics:
Section 28.1, "How Are Unrealized Gains and Losses Calculated?"
Section 28.2, "How Are Unrealized Gains and Losses Recorded?"
With monetary account valuation, you calculate the current domestic value of the G/L account number based off the foreign balance.
The Monetary Account Valuation program calculates unrealized gains and losses as follows:
Compares the currency code of selected accounts (the CA ledger for foreign balances) with the currency code of the company with which the account is associated (the AA ledger for domestic balances)
Retrieves an exchange rate from the Currency Exchange Rates table (F0015) based on the comparison using the "as of" date specified in the related processing option
Multiplies the original foreign balance by the exchange rate to compute the new domestic balance
Compares the new domestic balance to the original domestic balance from the AA ledger to calculate the unrealized gain or loss
You need a journal entry to record the unrealized gain or loss. You can enter the journal entry manually, or you can set processing options to have the program create the journal entry.
The journal entry for unrealized gains and losses:
Must have a document type of JX. This document type adjusts only the domestic side (AA ledger) of the monetary account and leaves the foreign side (CA ledger) unchanged.
Must have the currency code for the domestic currency of the company.
Should be a reversing entry because the gain or loss is not realized; it applies to the end of the period only and the reversing entry will automatically occur at the beginning of the following period. A processing option is available to choose if reversing or not.
Accounting rules in many countries (such as GAAP in the U.S.) specify that you report only currency losses, not gains. You can set a processing option so the program creates journal entries only for losses.
If you set the processing options to automatically create journal entries for unrealized gains/losses, the program uses the following AAIs:
| AAI | Description |
|---|---|
| GVxxx | Designates which account to use for unrealized gains on a monetary account. You can optionally set up a separate item for each currency code (xxx). |
| GWxxx | Designates which account to use for unrealized losses on a monetary account. You can optionally set up a separate item for each currency code (xxx). |
| GR | Designates which offset account to use for unrealized gain/loss. If the offset is the monetary account (for example, 100.1110.FRANCE), which is usually the case, do not set up this AAI.
Caution: If you use GR, ensure that it is company specific. DO NOT set up a record for the default company 00000, if you do the system will error and not write the Journal Entry. |