Foreign Exchange

Foreign Exchange

Use

Foreign exchange transactions are pending transactions which are usually only posted when they become due. This means that there is no related balance sheet position which needs to be transferred.

Hence, the system converts the existing amounts in transaction currency directly into euros.

If, by contrast, the main flows relating to a foreign exchange transaction have already been (pre-)posted, the procedure used for money market positions is applied to each of the two flows.

For each currency you want to convert, the system translates the posted flows into the local currency amount using a fixed rate, and posts the flows to a clearing account. Any differences between the local currency amounts calculated and the book value are cleared by means of a P&L flow. The transaction currency amount is translated into euros and then posted from the clearing account to a corresponding euro account.

If you want to settle a transaction involving two foreign currencies after conversion to fulfil the original purpose, even if it is no longer, strictly speaking, a foreign exchange transaction, the key date valuation function ensures that the swap accrual/deferral can be calculated correctly up to the transaction due date.

The following sections describe the features of the transaction currency changeover which are specific to the foreign exchange area.

FX Transaction: One Currency to be Converted

FX Transaction: Two Currencies to be Converted

Valuation Without Conversion

Valuation Without Conversion (general)

If you do not carry out the transaction currency changeover at the beginning of the dual currency phase, you may need to perform a valuation based on the fixed euro exchange rate. The valuation is made independently of the valuation principles used for key date valuation, since both gains and losses resulting from translation to the euro are to be disclosed.

Procedure

Start report program RFTBEUR00.

Select the required application and enter the corresponding flow types for euro gains/losses.

Enter a number range (even though no transaction number is assigned).

Select the Only execute valuation field.

Execute the report program.

Valuation Without Conversion (for Foreign Exchange)

Foreign exchange transactions that have two participating currencies and have not yet been posted are valued on the basis of the acquisition value. Any existing key date valuations are reset automatically.

The system generates a valuation flow using the flow types for euro gains/losses.

Where transactions have already been posted, the procedure is the same as for money market transactions.