Setting Up Currencies

This chapter provides an overview of currencies and discusses how to:

• Set up currencies.

• Calculate currency exchange.

Understanding Currencies

This section discusses:

• Currency management in PeopleSoft Enterprise Customer Relationship Management (PeopleSoft Enterprise CRM).

• Direct and indirect rate quotations.

• Triangulation.

• Automatic reciprocation of quote methods.

Currency Management in PeopleSoft Enterprise CRM

PeopleSoft Enterprise CRM enables you to manage financial information in multiple currencies and perform currency conversions. The Currency Code table that PeopleSoft Enterprise CRM delivers defines many common currencies that are identified by the International Standards Organization (ISO) standard, including the European common currency (euro). You can update the currency definitions on this table or enter new ones.

Note. The Currency Code table supports the ISO standard of zero, two, and three decimal positions.

PeopleSoft supports direct and indirect rate quotation, quote units, and triangulation to provide you with flexible tools to convert and manage multicurrency operations. The currency quotation method controls how a stored rate appears and how an entered rate is interpreted and stored in the database.

You can set up a currency quotation method for each from and to pair of currencies that you use. Define currency quotation options before entering and calculating rates.

Direct and Indirect Rate Quotations

An exchange rate is the price of one currency, such as the British pound, in terms of another currency, such as the U.S. dollar. Exchange rates are quoted directly or indirectly. Most countries use the direct method. With this method, the exchange rate indicates how much of the local currency is exchanged for one unit of the foreign currency. For example, suppose that one has to pay .6326 pounds to obtain one dollar, the direct quotation is 1 USD = .6326 GBP.

With the indirect method the exchange rate is expressed as the amount of foreign currency that is required to purchase one unit of the domestic currency. In the preceding example, the indirect quotation is 1 GBP = 1.5814 USD.

Triangulation

Triangulation is used in hyperinflationary environments in which all conversions to the local currency are done through a reference currency—a stronger, more stable currency, such as the U.S. dollar.

For currency pairs that triangulate, you do not typically maintain rates online. Instead, the Cross Rate/Triangulation Generation SQR (Structured Query Report) uses these three exchange rates:

• The rate between the from and reference currencies.

• The rate between the reference and to currencies.

• The cross rate between the from and to currencies.

Typically, you do not maintain these rates directly.

Set up the currency quotation methods correctly to yield the correct results for triangulation. Two fields store the rate conversion factor: RATE_DIV and RATE_MULT. With these in mind, the currency conversion formula is always (From currency / RATE_DIV) * RATE_MULT = To currency.

For example, converting from the Russian rouble (RUR) to the Brazilian real (BRL) through the U.S. dollar (USD) is a two-step conversion. First, the RUR is converted to the USD using the appropriate triangulated rate (which uses the RUR to USD component of the triangulated rate that is stored in RATE_DIV). Second, the USD is converted to the real by using the fixed exchange rate (which uses the USD to BRL component of the triangulated rate that is stored in RATE_MULT).

It was a legal requirement to use triangulation to convert currencies participating in the euro prior to January 1, 2002. Even after an enterprise has switched over to the euro, it is necessary to keep historical data available in the national currency unit in order to maintain an audit trail. In most countries, national law requires enterprises to keep accounting records in their original form for at least 5 to 10 years. This is important to avoid synchronization problems between the legacy and the converted systems. For example, representing amounts dated before the euro came into existence in euro could cause anomalies when comparing data that was collected during the floating-rate era before January 1, 1999.

Conversion of historical data requires that you convert all instances of the same data in exactly the same way. This can cause rounding differences with non-normalized data, as is commonly the case in data warehouses that support management information systems (MIS) or decision support systems (DSS). Each organization must decide how significant such differences are in the context of the data use, which might be merely for internal trend analysis.

Automatic Reciprocation of Quote Methods

The Currency Quotation Method page automatically reciprocates itself. For example, if you define the conversion of USD to GBP as indirect, the system automatically creates this record to indicate a quote method of direct. If you change the quote method on the GBP to USD record, the system automatically updates the USD to GBP record.

This table lists each possible value with its reciprocal value:

Setting Up Currencies

To set up currencies, use the Currency Code (CURR_CD_TABLE) and Currency Quotation Method (CURR_QUOTE_PNL) components.

This section discusses setting up currencies in PeopleSoft Enterprise CRM.

Pages Used to Set Up Currencies

Adding or Updating Currency Codes

Access the Currency Code page.

Currency Symbol

Enter a currency symbol. You can change the currency symbol that is delivered with the application or enter new symbols for currencies.

Scale Positions

Enter the number of numerals that you want to appear to the left of the decimal. The system rounds numbers accordingly for display, although it actually stores data with full precision in the database. For example, suppose that you want all million dollar amounts to appear as the number of millions without the zeros, enter 6 as the scale position. In this case, 24,000,000 appears as 24, but it is stored in the database as 24,000,000.

Setting Up the Currency Quotation Method

Access the Currency Quotation Method page.

Rate Quotation Basis

Triangulation Options

Use the Triangulation Options group box to set up triangulation between currencies.

Calculating Currency Exchange

This section discusses how to calculate currency exchange.

Page Used to Calculate Currency Exchange

Calculating Currency Exchange

Access the Currency Exchange Calculator page.

Effective Date

Enter the date of the currency conversion. The system uses the rate that is effective on the date that you enter.