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 Direct and Indirect Quotation for Exchange Rates 

Purpose

This component enables you to manage exchange rates for each currency pair using direct or indirect quotation. The type of quotation used is dependent on the market standard. You can define the type of quotation per client and currency pair (business transaction).

Indirect quotation has not been required until now, because direct quotation was usually used for exchange rates. With the start of the dual currency phase of the European Monetary Union (EMU), indirect quotation is now used within Europe for exchange rates with the euro. Indirect quotation is also becoming more widely accepted internationally. Until now, there were many limitations involved in processing indirect exchange rates.

Direct quotation is where the cost of one unit of foreign currency is given in units of local currency, whereas indirect quotation is where the cost of one unit of local currency is given in units of foreign currency.

Your local currency is EUR:

- Direct exchange rate: 1USD = 0.92819 EUR

- Indirect exchange rate: 1EUR = 1.08238 USD

The table for Maintaining exchange rates (TCURR) has been redesigned so that you can enter an exchange rate with either direct or indirect quotation. (Implementation Guide (IMG): General Settings ® Currencies ® Enter exchange rates).

An extra column is provided for entering indirect exchange rates.

You have used direct quotation to define exchange rates up until now; the exchange rates are specified with direct quotation for the to-currency (local currency/reference currency).

You had to maintain exchange rates, such as the euro, in the table for Exchange rate types for currency translation (TCURV) so that indirect quotation could be used for calculations. The fields Reference currency left and EMU conversion were selected for these exchange rate types. When entering exchange rates manually in the applications, you still had to use direct quotation to enter the exchange rates. The document display shows the direct exchange rate.

However, this concept cannot be extended to general exchange rate types.

 Example

Previously:

Your local currency is EUR:

Exchange rate type

Currency (from)

Currency (to)

Valid from

Exchange rate

Translation ratio

M

USD

EUR

01.01.1999

92.81993

100:1

EURO

EUR

USD

01.01.1999

1.08238

1:1

The first line shows a direct exchange rate USD – EUR; the local currency is the to-currency. 100 USD equal 92.81993 EUR.

The second line shows an indirect exchange rate EUR – USD; the local currency is the from-currency. 1EUR equals 1.08238USD.

Change:

Your local currency is EUR:

You can define the exchange rate for a currency pair using either direct or indirect quotation.

Exchange rate type

Valid from

Indirect quotation

X

Factor (from)

Currency (from)

=

Direct quotation

X

Factor (to)

Currency (to)

M

01.01.1999

 

X

100

USD

=

92.81993

X

1

EUR

EURO

01.01.1999

1.08238

X

1

USD

=

 

X

1

EUR

Indirect exchange rates are always given with the local currency or reference currency as the to-currency.

First line: Direct quotation is read from left to right, as before: 100 USD equal 92.81993 EUR.

Second line: Indirect quotation is read from right to left, because the local currency is always the to-currency: 1 EUR equals 1.08238 USD.

 

Implementation Considerations

Integration

This function affects all applications that work with exchange rates.

Features

The distinction between direct and indirect quotation is made by means of a prefix on the user interface. The following settings have been made in the standard system:

  • Direct quotation: ' '
  • Indirect quotation: ' / '

Direct exchange rates do not have a prefix.

Your local currency is EUR. You enter a business transaction in the transaction currency USD. Until now, you had to use direct quotation to enter the exchange rate (1USD =0.92819 EUR). If you have defined '/' as the prefix for indirect quotation, you can also enter the exchange rate with indirect quotation (1 EUR = 1.08238 USD) by entering '/1.08238' in the exchange rate field.

You can change the settings for the prefixes at any time.

You can reduce the likelihood of errors being made by defining a prefix for both forms of quotation, since the user is then forced to think about the correct form.

You can maintain your own settings in the Implementation Guide (IMG): General Settings ® Currencies ® Set Indicators for Direct/Indirect Quotation Exchange Rates.

  • Direct or indirect quotation can be maintained as the standard form of quotation for a certain currency pair. You use:

- '1' for direct quotation

- '2' for indirect quotation

If a standard form of quotation has not been specified for a currency pair, the system automatically uses direct quotation.

You make the settings in the IMG: General Settings ® Currencies ® Set Standard for Direct/Indirect Quotation per Currency Pair.

 

  • If you do not make any settings of your own, the system uses the standard settings.

 

  • Indirect quotation can be used in the Industry Business Solutions (as of Release 4.5B/4.6A), interfaces (BAPI, IDOC, user exits, etc.), and New Dimension products.

 

  • You must adapt your own batch inputs to the new exchange rates. The batch inputs provided by SAP have already been adapted.

 

  • Indirect exchange rates are stored with a minus sign (-) at database level.

 

  • Indirect quotation is delivered with the standard system as of Release 4.6A. You can use the extended function, or you can continue to work with direct quotation only.

 

Constraints