1. Multicurrency Processing Implementation Guide
  2. Understanding Intercompany Journal Entries in a Foreign Currency

Understanding Intercompany Journal Entries in a Foreign Currency

The base currency of an intercompany journal entry is typically determined by the currency of the company that is associated with the general ledger account on the first line of the document. The transaction currency on the journal entry is compared with the company currency to determine whether the journal entry is domestic or foreign. Unlike journal entries, the base currency of accounts receivable and accounts payable transactions is determined by the company entered in the header portion of the transaction.

For intercompany journal entries, you can enter the amount in either the domestic or foreign currency. When you enter a domestic amount, the system creates the amount with the number of decimals of the company base currency. When you enter a foreign amount, the system creates the amount with the number of decimals of the transaction currency. The number of decimals for each currency is stored in the Currency Codes table (F0013). When you enter an intercompany journal entry with multiple currencies, the system updates the GLALT1 field in the F0911 table with 1.

When you post intercompany journal entries, the post program creates an adjusting entry in the F0911 table to balance the domestic amounts (AA ledger) of the non-base currency accounts. The non-base currency accounts are the accounts on the second and successive lines of a journal entry; the base currency account is typically the account on the first line. The adjusting entry is identical to the original AA ledger record except that:

  • The amount is an adjusting debit or credit.

  • The system updates the Line Extension Code field (GLEXTL) with AM to make it a unique record; otherwise, a duplicate key problem would exist. This AM record appears only on the General Ledger Post Report and in the Universal Table Browser (UTB) for F0911.

The original journal entry and its associated adjusting entry net to the correct amount for the actual base currency of the non-base currency account.