The Carry-forward Balances program generally carries forward data you have entered and consolidation postings you have made into the new fiscal year. If the exchange rate changes in the new fiscal year, the total difference is incorrectly split in the subsequent consolidation.

The following example illustrates this point:

In fiscal year 01 accounts receivable and payable between two subsidiary companies are eliminated. The data is transferred into fiscal year 02 by the Carry-forward Balances program. The exchange rate from FRF to DEM changes from 0.4 to 0.5 in fiscal year 02.

This difference split is calculated as follows: the system reads the consolidated values in the elimination set of accounts receivable and payable and determines a difference of 180- DEM. In order to determine which amount is caused by exchange rates and which amount by other reasons, the system reads all amounts in transaction currency in the elimination set and checks these for differences. If the system finds differences in transaction currency, it reports them as Other Differences (translated into the group currency). In the above example, the system finds differences of 200- FRF. It translates this amount using the exchange rate 0.4 and reports Other Differences of 80- DEM. The balance of the total difference of 180- DEM is 100- DEM, representing the differences caused by currency translation.

Breakdown of differences: (resulting from eliminating entries in fiscal year 02)

This difference split is calculated as follows: the system reads the consolidated values in the elimination set of accounts payable and receivable and determines a difference of 120- DEM. The system cannot find any differences relating to the amounts in transaction currency in the elimination set and therefore reports the difference of 120- DEM as being fully caused by currency translation.

Together with the differences from the balances carried forward from fiscal year 01, the sum totals of the differences reported are as follows:

Sum total of differences:

• The currency translation differences of 200- DEM represent the balance of the total difference of 300- DEM.

• After entering individual financial statement data and after carrying out IC elimination entries, the exchange rates change within the period. In this case too, the split is not correct.

When you change over from IC elimination without currency splits in one fiscal year to IC elimination with currency split in the next fiscal year, then the difference split of the previous year is run within the current year. If the elimination differences are stated on the income statement, the net income for the present year will be influenced by transactions that are causally applicable to the previous year.

The following example illustrates this:

In fiscal year 01 the accounts receivable and payable between two subsidiary companies are eliminated. The carry-forward balance program carries forward the data into fiscal year 02. The exchange rate from FRF into DEM is 0.5. In FY 02 intercompany elimination occurs with splitting of differences.

Fiscal Year 02 (transaction currency values are accounted for)

In FY 02 the system discovers a transaction currency difference of DEM -20. Since no difference in group currency exists, the system reports Other Differences of DEM -20 and Currency Translation Differences of DEM 20. These group currency values balance to 0.

These differences would have been reported for fiscal year 01, if splitting of differences had been set.

If the Other Difference and/or Currency Translation Difference are reported on the income statement, then the annual net income for FY 02 is manipulated by a transaction that applies to FY 01. In order to remedy this, the IC elimination for the FY 01 values must be performed once more in period 01 of FY 02 with the difference split; and the differences must be cleared against unappropriated retained earnings.

• In FS Item Maintenance, select the Brkdwn currency indicator for the items concerned.

• In a further data entry form, enter the items in two steps; by partner and by currency.

• In the elimination rule, select the Currency split indicator.

• In Document Type Maintenance, select both the TC (Post in transaction currency) and the GC (Post in group currency)indicators.