You can record currency translation differences that arise in the elimination of interunit profit/loss in inventory when different exchange rate indicators are used.

Currency translation differences can result for the following reasons:

• You record goods supply data grouped by pairs of consolidation units and grouped by product group. The system translates this additional financial data into group currency as part of the calculation of IU profit/loss. Using the exchange rate indicator you specified in the task, the system determines the exchange rate for the inventory item assigned to the product group.
• IU profit/loss is therefore calculated using the exchange rate for inventory accounts. The entry for the elimination of IU profit/loss is posted to an inventory item and its offsetting item (which is typically an income statement item)..
• Income statement items are often translated using different exchange rates than for balance sheet items, for example, with average rates. This means that the group currency value of the revenues or expenses to be eliminated can differ from the calculated IU profit/loss. This discrepancy is a translation difference.
• Translation differences can occur in interunit profit/loss in inventory because the relevant additional financial data is translated twice: once using the exchange rate indicator defined in the task, and once using the comparison exchange rate indicator (which is also defined in the task).

The system automatically posts translation differences that occur for inventory items to the differential item you specify beforehand. This should be the same currency translation item you specified in customizing for currency translation.

Temporal translation differences, which result from changes in exchange rates between two different consolidation dates, influence interunit profit/loss. The system posts these differences with a summarized amount and also splits this amount to distinguish between "pure profit/loss" and exchange rate differences between two closing dates.

• The balance sheet items
• The income statement items

• Specify a translation differential item in the posting items.