23 Setup Alternate Currency Payment
This chapter contains these topics:
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Section 23.1, "Setup Requirements for Alternate Currency Payments,"
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Section 23.2, "Purpose of an Alternate Currency Clearing Account."
You can pay vouchers in a currency other than the domestic or foreign currency of the voucher by using the automatic payment method or manual payment with voucher match.
23.1 Setup Requirements for Alternate Currency Payments
To pay vouchers in an alternate currency, you must set up the following:
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Alternate currency clearing account and automatic accounting instruction (AAI)
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Alternate currency payment gain accounts and AAIs
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Alternate currency payment loss accounts and AAIs
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Processing options for alternate payments
To calculate the gain or loss amount associates with a foreign currency payment, the system calculates the changes in the exchange rate and the rate used at time of payment.
When you process alternate currency payments, there is an additional gain or loss on the transaction that is associated specifically with the alternate currency.
The gain and loss accounts for alternate payments and standard gain and losses can be different. The differences are handled by using different sets of AAIs.
The gains and losses for alternate currency payments are recorded separately from standard gains and losses.
23.1.1 Work with Payment Groups (P04257)
When processing payment in alternate currency, you can choose to enter a spot rate to allow the exchange rate to be selected from the exchange rate table based on the payment (G/L) used. A processing option in Work with Payment groups controls this option.
On Work with Payment Groups
Figure 23-1 Work With Payment Group screen
Description of "Figure 23-1 Work With Payment Group screen"
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Complete the following field:
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Bank Account
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Press Enter.
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Do one of the following to display the "Write Payments" screen:
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Enter 3 in the Option (OP) field.
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Press F10
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Complete the following fields
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Payment / G/L Date
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Next Payment (Optional)
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Click the Checkmark.
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Do one of the following:
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Enter 4 in the Option (OP) field.
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Press F11.
Note:
This screen displays two sets of currencies the "To" and "From" currencies, between foreign and alternate and between foreign to domestic. -
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Do one of the following:
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To specify a spot rate for a currency pair enter the rate in the Rate field and press F6:
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Rate
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To continue with out specifying a spot rate for a currency pair, press F6.
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To exit from this screen without updating the payment group, press F5.
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23.1.3 Alternate Currency Clearing Account and AAI (P7)
To record a payment in an alternate currency, you must set up an alternate currency clearing account to track the conversion of the payment amount. The payment amount is recorded in the alternate currency and must be converted to the currency of the voucher. This clearing account provides an audit trail from the cash account entry in the payment currency to the offset trade account entry in the domestic currency.
The alternate currency clearing account is assigned to AAI item P7 and must follow these rules:
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It must be in the same company as the bank account from which the payment is made.
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It cannot be a monetary account.
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It must be company specific. You cannot use company 00000 as a default.
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It must include a business unit.
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It must be set up with a blank offset field and no currency code value. If set up, the system ignores them.
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The business unit is optional, unlike Accounts Receivable where it is required.
23.1.4 Alternate Currency Payment Gain/Loss Accounts and AAls (PY/PZ)
To record a gain incurred on an alternate currency payment, you must set up a gain account. This account shows the gains realized when the domestic amount of a payment is less than the amount, which is derived by calculating from the alternate currency to the foreign currency to the domestic currency.
The gain account for the alternate currency payment is assigned to AAI item PY.
To record a loss incurred on an alternate currency payment, you must set up a loss account for an alternate currency payment. This account shows the losses realized when the domestic amount of a payment is greater than the amount derived by calculating from the alternate currency to the foreign currency to the domestic currency.
The loss account for the alternate currency payment is assigned to AAI item PZ.
AAI items PY/PZ follow the same search sequence.
In Automatic Account Instructions (P00121), set up:
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PYxxx - Alternate Currency Gain, where xxx represents the alternate currency code (optional)
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PZxxx - Alternate Currency Loss, where xxx represents the alternate currency code (optional)
AAI items PY and PZ follow the same search sequence:
| AAI | Explanation |
|---|---|
| PYxxx | For a specific company (where xxx is the currency code) |
| PYxxx | For company 00000 (where xxx is the company code) |
| PYyyyy | For a specific company (where yyyy is the G/L offset) |
| PYyyyy | For company 00000 (where yyyy is the G/L offset) |
| PY | For a specific company (with <blank> or no offset) |
| PY | For company 00000 (with <blank> or no offset) |
This is the same AAI search sequence that is used for standard gains and losses.
23.2 Purpose of an Alternate Currency Clearing Account
Since the original voucher amount recorded against the payables trade account is in the domestic or foreign currency, the offset amount must also be in the same currency. To calculate this offset amount, the payment currency is converted to the domestic or foreign currency and then stored in the clearing account.
The alternate currency clearing account will balance on the domestic side but not on the foreign side. This is because the foreign side contains different currencies, which will never balance.
The entries for an alternate currency receipt are as follows:
Figure 23-4 Entries for Alternate Currency Receipts
Description of "Figure 23-4 Entries for Alternate Currency Receipts"
The alternate currency clearing account provides the audit trail from the bank account entry in the payment currency to the offset trade account entry in the domestic currency.
23.2.1 How Gains/Losses Are Calculated on Alternate Payments
Gains and losses are calculated using the exchange rates that are effective on the date of the payment. For alternate currency payments, gains and losses are recorded on two different entries.
One entry is calculated based on the fluctuation of the exchange rates between the transaction currency and the company currency. This gain or loss is the same gain or loss that would have been realized if the payment did not include an alternate currency.
The other entry is the difference between the following amounts:
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The amount calculated by converting from the payment currency to the transaction currency and then converting that to the company currency.
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The amount calculated by converting from the alternate currency payment directly to the company currency (this is the amount that is actually paid from the bank account).
A gain or loss is recorded if the amount that is actually paid (2) is less than or greater than the amount calculated from converting the payment currency to the transaction currency to the company currency (1).
Another way of stating this is the alternate currency gain or loss is calculated as the domestic amount applied to the bank minus the domestic payment amount applied to the voucher. These will usually be small amounts caused by rounding differences.
This gain or loss will use AAI items RY or RZ.