Understanding Multicurrency Processing

Base Currency

A business unit can have only one base currency. This is generally the local currency for the organization. Accounting rules or other circumstances may dictate that it be different.

In PeopleSoft Receivables, you assign a base currency to each business unit on the general ledger Definition page. PeopleSoft Receivables business units use the base currency of their associated general ledger business units. Once established, the base currency of a general ledger business unit cannot be changed.

The system stores all customer-level accounting data in the business unit base currency. This includes balance information stored on the Customer Information and Balances table (PS_CUST_DATA), aging information stored on the Customer Aging table (PS_CUST_AGING), and history information maintained on the Customer History table (PS_CUST_HISTORY).

Entry and Payment Currency

Any currency in which a business unit conducts business—other than its base currency—is a foreign currency. This documentation refers to a foreign currency as the entry currency when describing the currency in which customers are billed and as the payment currency when describing the currency in which customers pay.

The system stores all item-level accounting data in both the business unit base currency and the entry currency. Maintaining accounting data in this parallel form enables you to view item-level information in either currency.

Conversion

Conversion is the exchange of one currency for another. In PeopleSoft Receivables, this refers to expressing the value of foreign currency transactions in terms of the base currency. Conversion occurs in many places in your PeopleSoft Receivables system.

When you receive items from a billing system, you can supply an entry amount in a foreign currency. The system uses an exchange rate to convert the entry amount to the business unit base currency amount. When you apply payments in one currency to items in a different currency, the system performs currency conversion as necessary to enable payment application. During the revaluation of your current receivables balance, the process revalues open items based on business unit base currency.

Exchange Rate

An exchange rate is the value of one currency expressed in terms of another. Actual exchange rates vary based on the currency rate type that you use. There are several recognized currency rate types, including spot (immediate), current, negotiated (discount and premium forward rates), average, and historical rates. The system supports any number of exchange rates.

Unrealized Gains and Losses

An unrealized gain or loss represents the difference between the amount you would receive in your base currency if your outstanding foreign currency accounts receivable balance were paid now, and the amount you would have received if payment was made when the items were created. If the exchange rate is more favorable now than when the items were created, you have an unrealized gain. If the exchange rate is less favorable now, you have an unrealized loss.

Realized Gains and Losses

A realized gain or loss represents the actual increase or decrease, due to exchange rate fluctuations, in the amount of money received in the base currency. The system determines realized gain or loss at payment time and when you offset items on the maintenance worksheet or by running the Automatic Maintenance Application Engine process (AR_AUTOMNT).