## 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:

 Page Element Value (for RUR to BRL) Reciprocal Value (for BRL to RUR) Rate Quotation Basis Direct Indirect Indirect Direct Quote Units Any value Same value Rate Decimal Positions 4 (default value) Same value Auto Reciprocate Yes No Yes No Triangulate Yes No Yes No Reference Currency Any value Same value Primary Visual Rate From - To (RUR - BRL) From - Reference (RUR - USD) Reference - To (USD - BRL) From - To (BRL - RUR) Reference - To (USD - RUR) From - Reference (BRL - USD) Cross-Rate Allow Override Yes No Yes No Cross-Rate Recalculate From - Reference (RUR - USD) Reference - To (USD - BRL) Reference - To (USD - RUR) From - Reference (BRL - USD)

### 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

 Page Name Definition Name Navigation Usage Currency Code CURRENCY_CD_TABLE Set Up CRM, Common Definitions, Currency, Currency Code, Currency Code Add or update a currency code. Currency Quotation Method CURR_QUOTE_PNL Set Up CRM, Common Definitions, Currency, Currency Quotation Method, Currency Quotation Method Set up and maintain a currency quotation method for each from currency and to currency pair.

#### Adding or Updating Currency Codes

Access the Currency Code page (Set Up CRM, Common Definitions, Currency, Currency Code, Currency Code).

 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 (Set Up CRM, Common Definitions, Currency, Currency Quotation Method, Currency Quotation Method).

Rate Quotation Basis

 Direct Select if you want direct quotes for currency pairs. For example, for a conversion of dollars to euros, a direct quote indicates that 1 USD = x.xxxx EUR. Note. You must still classify currency pairs that triangulate as either direct or indirect for use in displaying the calculated cross rate. Indirect Select if you want indirect quotes for currency pairs. For example, for a conversion of dollars to euros, an indirect quote indicates that x.xxxx USD = 1 EUR. Note. You must still classify currency pairs that triangulate as either direct or indirect for use in displaying the calculated cross rate. Quote Units Enter any value in this field, although quote units generally have a scale of 10 (such as 10, 100, 1000). The default value for this field is 1. Quote units, sometimes called scaling factors, are used to preserve decimal position. For example, you might state the exchange rate between roubles and dollars as 1000 RUR = 31.4169 USD instead of 1 RUR = 0.031469 USD. Auto Reciprocate Select to have the system automatically create or update the rate for the reciprocal currency pair whenever an exchange rate is added or updated. For example, when you enter a new USD to GBP rate, the GBP to USD rate is updated automatically. You can only automatically reciprocate currency pairs for which quotation methods are established. The check box is selected by default.

Triangulation Options

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

 Triangulate Select to convert two currencies through a third currency (the reference currency). Reference Currency Enter the currency through which the from currency is converted. For example, when the system converts between Russian roubles and Brazilian reals, the reference currency might be the United States dollar. Primary Visual Rate Select the primary rate. The primary rate appears on primary pages and reports. Allow Override Select to enable users to override the cross rate for a triangulated currency pair. If this check box is cleared, users can only change the components of the triangulated rate. If you select this check box, you must specify which currency pair the system uses to recalculate to keep the triangulation accurate. Recalculate Select the method for recalculation.

### Calculating Currency Exchange

This section discusses how to calculate currency exchange.

#### Page Used to Calculate Currency Exchange

 Page Name Definition Name Navigation Usage Currency Exchange Calculator CURRENCY_EXCHNG_PN Set Up CRM, Common Definitions, Currency, Currency Exchange, Currency Exchange Calculator Calculate the currency exchange between currencies.

#### Calculating Currency Exchange

Access the Currency Exchange Calculator page (Set Up CRM, Common Definitions, Currency, Currency Exchange, Currency Exchange Calculator).

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