When you enter an invoice in foreign currency, the system automatically translates the foreign currency amounts to local currency.

The system calculates the exchange rate as follows:

• If the buyer entered a fixed exchange rate in the purchase order, the system uses this rate to translate the amounts to local currency.
• If an exchange rate was entered in Invoice Verification, the system uses this rate to translate the amounts to local currency.
• If an exchange rate was entered in neither the purchase order nor Invoice Verification, the system uses the exchange rate pre-defined in Customizing for Financial Accounting that is valid for the posting date.

If a purchase order is entered in foreign currency, the amounts are translated from foreign currency into local currency at goods receipt. If you enter the invoice for the purchase order in the foreign currency, this can lead to currency translation differences between the goods receipt and the invoice receipt.

How these differences are posted depends on how your system is configured in Customizing for Invoice Verification:

• The exchange rate differences are based on the value determined using the exchange rate at the time of goods receipt minus the value determined using the exchange rate at the time of invoice receipt.
• The exchange rate differences are based on the value determined using the exchange rate at the time of invoice receipt minus the value determined using an assumed or planned exchange rate valid for a full year or a season, for example.
• No exchange rate differences are determined. Fluctuations in the exchange rate are treated as price variances and posted to a stock or price difference account, depending on the type of price control defined for the material.

When an invoice is posted in a foreign currency, the amounts are translated into local currency. Since the system rounds off the amounts in each posting line, this can lead to rounding differences due to the currency translation.

When no cross-company code transaction takes place and no different tax rate has been used, these differences are posted to the vendor account.