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4 Common Applications Configuration: Define Currencies and Currency Rates

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This chapter contains the following:

Manage Currencies

Manage Conversion Rate Types

Manage Daily Rates

Manage Currencies

Defining Currencies: Points to Consider

When creating or editing currencies, consider these points relevant to entering the currency code, date range, or symbol for the currency.

Currency Codes

You cannot change a currency code after you enable the currency, even if you later disable that currency.

Date Ranges

Users can enter transactions denominated in the currency only for the dates within the specified range. If you do not enter a start date, then the currency is valid immediately. If you do not enter an end date, then the currency is valid indefinitely.

Symbols

Even if you enter a symbol for a currency, the symbol is not always displayed when an amount is displayed in this currency. Some applications use currency symbols when displaying amounts. Others, like Oracle Fusion General Ledger, do not.

Euro Currency Derivation: Explained

Use the Derivation Type, Derivation Factor, and Derivation Effective Date fields to define the relationship between the official currency (Euro) of the European Monetary Union (EMU) and the national currencies of EMU member states. For each EMU currency, you define its Euro-to-EMU fixed conversion rate and the effective starting date.

Note

If you need to use a different currency code for Euro, you can disable the predefined Euro currency and create a new one.

Derivation Type

The Euro currency derivation type is used only for the Euro, and the Euro derived derivation type identifies national currencies of EMU member states. All other currencies do not have derivation types.

Derivation Factor

The derivation factor is the fixed conversion rate by which you multiply one Euro to derive the equivalent EMU currency amount. The Euro currency itself should not have a derivation factor.

Derivation Effective Date

The derivation effective date is the date on which the relationship between the EMU currency and the Euro begins.

FAQs for Manage Currencies

When do I create or enable currencies?

Create currencies to use, for example for reporting purposes, if they are not already provided. All currencies from the International Organization for Standardization (ISO) 4217 standard are provided.

Enable any currency other than USD for use in Oracle Fusion Applications, for example for displaying monetary amounts, assigning to sets of books, entering transactions, and recording balances. Only USD is enabled by default.

What's the difference between precision, extended precision, and minimum accountable unit for a currency?

Precision is the number of digits to the right of the decimal point used in regular currency transactions. Extended precision is the number of digits to the right of the decimal point used in calculations for this currency, and it must be greater than or equal to the standard precision. For example, USD would have 2 for precision because amounts are transacted as such, for example $1.00. For calculations, for example adding USD amounts, you might want the application to be more precise than two decimal digits, and would enter an extended precision accordingly.

Note

Some applications use extended precision. Others, such as Oracle Fusion General Ledger, do not.

Minimum accountable unit is the smallest denomination for the currency. For example, for USD that would be .01 for the cent. This unit does not necessarily correspond to the precision for all currencies.

What's a statistical unit currency type?

The statistical unit currency type is used only for the Statistical (STAT) currency. The Statistical currency is used to record statistics such as the number of items bought and sold. Statistical balances can be used directly in financial reports, allocation formulas, and other calculations.

Manage Conversion Rate Types

Creating Conversion Rate Types: Critical Choices

Maintain different conversion rates between currencies for the same period with the Oracle Fusion General Ledger conversion rate types functionality. Four predefined daily conversion rate types are seeded: Spot, Corporate, User, and Fixed, allowing you to use different rate types for different business needs. During journal entry, the conversion rate is provided automatically by the General Ledger based on the selected conversion rate type and currency, unless the rate type is user. For user rate types, you must enter the conversion rate. Define additional rate types as needed. Set your most frequently used rate type as the default. Conversion rate types cannot be deleted.

Assign conversion rate types to automatically populate the associated rate for your period average and period end rates for the ledger. For example, you can assign the predefined rate type Spot to populate your period average rates and the predefined rate type Corporate to populate your period end rates. Period average and period end rates are used in translation of account balances.

Conversion rate types are used to automatically assign a rate when you perform the following accounting functions:

  • Convert foreign currency journal amounts to ledger currency equivalents

  • Convert journal amounts from source ledgers to reporting currencies or secondary ledgers

  • Run Revaluation or Translation processes

In creating new conversion rates, decide whether to do the following:

  • Enforce inverse relationships

  • Select pivot currencies

  • Select contra currencies

  • Enable cross rates and allow cross rate overrides

  • Maintain cross rate rules

Enforce Inverse Relationships

Check the Enforce Inverse Relationship check box to specify whether or not to enforce the automatic calculation of inverse conversion rates when defining daily rates.


Action

Results

Checked

When you enter a daily rate to convert currency A to currency B, General Ledger automatically calculates the inverse rate, currency B to A, and enters it in the adjacent column. If either rate is changed, the application automatically recalculates the other rate.

You can update the application calculated inverse rate, but once you do, the related rate is updated. The check box enforces that the inverse relationship is maintained but does not prevent you from updating the rates.

Unchecked

General Ledger calculates the inverse rate but you can change the rate and update the daily rates table without the corresponding rate being updated.

Select Pivot Currencies

Select a pivot currency that is commonly used in your currency conversions. A pivot currency is the central currency that interacts with contra currencies. For example, you set up a daily rate between the US dollar (USD) and the Euro currency (EUR) and another between the USD and the Canadian dollar (CAD). USD is the pivot currency in creating a rate between EUR and CAD. EUR and CAD are the contra currencies. Select the pivot currency from the list of values which contains those currencies that are enabled, effective, and not a statistical (STAT) currency. The description of the pivot currency is populated automatically based on the currency definition.

If you want the application to create cross rates against a base currency, define the base currency as the pivot currency. Selected pivot currencies can be changed in the Rate Types page.

Select Contra Currencies

Select currencies available on the list of values as contra currencies. The available currencies are those currencies which are enabled, effective, not STAT currency, and not the pivot currency selected earlier. The description of the contra currency is populated automatically based on the currency definition. Add or delete contra currencies in the Contra Currencies region of the Rate Types page.

Enable Cross Rates and Allow Cross Rate Overrides

Check the Enable Cross Rates check box to calculate conversion rates based on defined currency rate relationships. General Ledger calculates cross rates based on your defined cross rate rules. Associate your cross rate rules with a conversion rate type, pivot currency, and contra currencies. Cross rates facilitate the creation of daily rates by automatically creating the rates between contra currencies based on their relationship to a pivot currency. If the Enable Cross Rates check box is changed to unchecked after entering contra currencies, the application stops calculating cross rates going forward for that particular rate type. All the earlier calculated cross rates for that rate type remain in the database unless you manually delete them.

For example, if you have daily rates defined for the pivot currency, USD to the contra currency, EUR, and USD to another contra currency, CAD, the application will automatically create the rates between EUR to CAD and CAD to EUR. This prevents the need to manually define the EUR to CAD and CAD to EUR rates.

Check the Allow Cross Rates Override check box to permit your users to override application generated cross rates. If you accept the default of unchecked, the application generated cross rates cannot be overridden

Maintain Cross Rate Rules

Define or update your cross rate rules at any time by adding or removing contra currency assignments. Add a contra currency to a cross rate rule and run the Daily Rates Import and Calculation process to generate the new rates. If your remove a cross rate rule or a contra currency from a rule, any cross rates generated previously for that contra currency remain unless you manually delete them. Changes to the rule are not retroactive and will not affect previously stored cross rates. The Cross Rate process generates as many rates as possible and skips currencies where one component of the set is missing.

Note

With a defined web service that extracts daily currency conversion rates from external services, for example Reuters, currency conversion rates are automatically updated for the daily rates and all cross currency relationships.

Using Rate Types: Examples

There are four seeded conversion rate types in Oracle Fusion applications:

  • Spot

  • Corporate

  • User

  • Fixed

Scenario

You are the general ledger accountant for InFusion America Inc. You are entering a journal entry to capture three transactions that were transacted in three different foreign currencies:

  • Canadian dollar (CAD): A very stable currency

  • Mexican Peso (MXP): A fluctuating currency

  • Hong Kong dollar (HKD): An infrequently used currency

You enter two lines with accounts and amounts for each foreign currency transaction. Based on your company procedures, you select the appropriate rate type to populate the rate for Corporate and Spot rate types from your daily rates table. You manually enter the current rate for the User rate type.


Currency Selected

Rate Type Selected

Reason

CAD

Corporate

Entered a periodic type of transaction. Your company has established a daily rate to use for the entire month across divisions for all transactions in CAD. CAD is a stable currency that only fluctuations slightly over the month.

MXP

Spot

Entered a periodic type of transaction. Your company enters daily rates each day for MXP because this currency is unstable and fluctuates.

HKD

User

Entered a one time transaction. Your company does not maintain daily rates in HKD.

Note

Your company does not currently use the Fixed rate type. From January 1, 1999, the conversion rate of the French franc (FRF) against the euro currency (EUR) was set at a fixed rate of 1 EUR to 6.55957 FRF. Your French operations were started in 2007, so you maintain all your French business records in the EUR.

FAQs for Manage Conversion Rate Types

What's the difference between spot, corporate, user, and fixed rate types?

Spot, corporate, user, and fixed conversion rate types differ based on the fluctuations of your entered foreign currency and your company procedures for maintaining daily rates.


Rate Type

Usage

Spot

For currencies with fluctuating conversion rates or when exact currency conversion is needed.

Corporate

For establishment of a standard rate across your organization for a stable currency.

User

For infrequent entries where your daily rates for the entered foreign currency are not set up.

Fixed

For rates where the conversion is constant between two currencies.

If you have infrequent foreign currency transactions, the user rate type can simplify your currency maintenance while providing an accurate conversion rate on the date of the transaction.

Manage Daily Rates

Entering Daily Rates Manually: Worked Example

You are required to enter the daily rates for currency conversion from Great Britain pounds sterling (GBP) to United States dollars (USD) each day for your company InFusion America Inc.

Oracle Application Development Framework (ADF) Desktop Integration is an Excel add-in that must be loaded onto each client. Because ADF Desktop Integration is an add-in to Microsoft Office products, you can use this feature only if they have Microsoft Excel 2007 or above, Internet Explorer 7 or above, and Microsoft Windows 7, XP Professional SP2, or Vista. Users must download the installation files from Navigator - Tools - Download Desktop Integrator Installer.

Entering Daily Rates

  1. Navigate to the Period Close work area.

    Use the Period Close work area to link to close processes and currency process.

  2. Click the Manage Currency Rates link.

    Use the Currency Rates Manager page to create, edit, and review currency rate types, daily rates, and historical rates.

  3. Click the Daily Rates tab.

    Use the Daily Rates tab to review and enter currency rates.

  4. Click the Create in Spreadsheet button.

    Use the Create Daily Rates spreadsheet to enter daily rates in a template that you can save and reuse.

  5. Click in the From Currency field. Select the GBP - Pound Sterling list item.
  6. Click in the To Currency field. Select the USD - US Dollar list item.
  7. Click in the Conversion Rate field. Select the Spot list item
  8. Click in the From Conversion field. Enter the desired information into the From Conversion field. Enter a valid value e.g. "8/1/2011".
  9. Click in the To Conversion Date field. Enter the desired information into the To Conversion Date field. Enter a valid value e.g. "8/1/2011".
  10. Click in the Conversion Rate field. Enter the desired information into the Conversion Rate field. Enter a valid value e.g. "1.33225".
  11. Click the Submit button. Click the OK button twice.
  12. Review the Record Status column to verify that all rows were loaded successfully.
  13. Save the template to use to enter daily rates frequently. You can save the spreadsheet to either a local drive or a shared network drive.

Updating Currency Rates: Worked Example

You are required to change today's daily rates that were already entered. The rates you are changing are for currency conversion from Great Britain pounds sterling (GBP) to United States dollars (USD) for your company InFusion America Inc.

Currency conversion rates were entered by an automatic load to the Daily Rates table. They can also be entered through a spreadsheet.

Updating Currency Rates

  1. Navigate to the Period Close work area.

    Use the Period Close work area to link to close processes and currency process.

  2. Click the Manage Currency Rates link.

    Use the Currency Rates Manager page to create, edit, and review currency rate types, daily rates, and historical rates.

  3. Click the Daily Rates tab.

    Use the Daily Rates tab to review and enter currency rates.

  4. Click the From Currency list. Select the GBP - Pound Sterling list item.
  5. Click the To Currency list. Select the USD - US Dollar list item.
  6. Enter the dates for the daily rates that you are changing. Enter today's date.
  7. Click the Rate Type list. Select the Spot list item.
  8. Click the Search button.
  9. Click in the Rate field. Enter the new rate of 1.7 in the Rate field.
  10. Click in the Inverse Rate field. Enter the new inverse rate of 0.58822 in the Inverse Rate field.
  11. Click the Save button.

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