Multicurrency Terminology in PeopleSoft Payables

Below are some key terms and concepts that you encounter when you use Oracle's PeopleSoft Financials multicurrency applications. Efforts have been made to use these terms consistently to coincide with generally accepted accounting terms and Financial Accounting Standards Board (FASB) rules.

Types of Currency

Currency refers to the denomination of a monetary transaction. PeopleSoft applications use a currency code to identify and track individual currencies. Though the system does not require it, it is suggested that you use the International Standards Organization (ISO) currency codes supplied with the application. You may use an unlimited number of currencies in PeopleSoft applications.

Term	Definition
Base Currency	The base currency is the primary currency used for a business unit, and is sometimes referred to as the unit's book currency. A business unit can have one and only one base currency. This is generally the local currency for the organization; however, accounting rules or other circumstances might dictate otherwise. In PeopleSoft Payables, you assign a base currency to each business unit on the General Ledger Definition - Definition page. PeopleSoft Payables 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.
Transaction and Payment Currency	Any currency with which a business unit interacts, other than its base currency, is a foreign currency. PeopleSoft Payables refers to a foreign currency as a transaction currency when describing the currency of the invoice, and as a payment currency when describing the currency in which payments are made. The system stores all distribution accounting data in three currencies: the base currency of the general ledger business unit on the distribution line, the PeopleSoft Payables business unit base currency, and the transaction currency.

Currency Calculations

The system performs several calculations when it works with multicurrency transactions.

Term	Definition
Conversion	Conversion is the exchange of one currency for another. In PeopleSoft Payables, this refers to expressing the value of foreign currency transactions in terms of the base currency. Conversion occurs in many places in your PeopleSoft Payables system. When receiving vouchers from a supplier, you can enter a transaction amount in a foreign currency. The system uses an exchange rate to convert the transaction amount to the PeopleSoft Payables business unit base currency and the general ledger business unit base currency. When you create payments in one currency for vouchers in a different currency, the system performs currency conversion as necessary to enable payment creation. It uses either the currency rate type, or override to convert the payment currency into the voucher's base currency, and the bank's general ledger base currency. During the revaluation of your current payables balance, the process revalues unpaid vouchers, based on business unit's 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 that you would pay in your base currency if your outstanding foreign currency accounts liability balance were paid now and the amount that you would have paid if payment was made when the items were created. If the exchange rate is more favorable now than when 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	Realized gains or losses represent the actual increase or decrease, due to exchange rate fluctuations, or rate type changes in the amount of money paid in the base currency. The system determines realized gain or loss only at payment time.