Understanding Monetary Valuation for Bank Accounts

If you work with foreign currencies, you have to revalue the monetary accounts to reflect current exchange rates by running the Monetary Account Valuation program (R09415). Monetary accounts, which are typically bank accounts, are accounts that accept only transactions in a specific currency. You assign a currency to the account master record in the F0901 table. This limits transactions to that specific currency.

The Monetary Account Valuation program also processes accounts with blank currency codes in the F0901 table if the accounts fall within the range for AAI item PBC. This AAI specifies account ranges for posting by currency. Unlike accounts that are assigned a specific currency, these accounts allow balances in multiple currencies.

You use the Monetary Account Valuation program to calculate the current domestic value of a foreign currency amount and determine the unrealized gain or loss due to exchange rate fluctuations. The calculation determines what the gain or loss would have been if you had converted the foreign balance to the domestic currency.

In many countries, accounting rules specify that you report unrealized losses, but not unrealized gains. You can set a processing option in the Monetary Account Valuation program to create journal entries only for losses. You can also set the processing option to create journal entries for gains only, or for both gains and losses.

In the United States, accounting rules (SFAS 52) specify that you report both unrealized gains and unrealized losses.

The journal entry document type is JX (foreign currency revaluation). This document type adjusts only the domestic side (AA ledger) of a monetary account and leaves the foreign side (CA ledger) unchanged.