Inflation Adjustment of Open Items in Foreign Currency
Use
You use this program to adjust for inflation open receivables and payables denominated in foreign currency and split the adjustment between the exchange rate fluctuation and the inflation rate.
Do not use this program if you only need to valuate the foreign currency items without splitting the result. In that case, use the standard
Features
To access the program, on the initial screen, choose Accounting → Financial Accounting → General Ledger → Periodic Processing → Closing → Valuate → Adjustment of Open Items in Foreign Currency.
Selection
On the selection screen, you specify:
Output
Assuming you valuate and adjust the open items for inflation, the program:
When it has done so, it:
The exchange rate difference is only present in the local currency, not in any parallel currencies.
The transaction currency of the split postings is always the transaction currency of the valuated item, that means, the foreign currency.
Example
Your local currency is the German mark (DEM). The dollar–mark exchange rate is 1:1.5, so the receivable is worth DEM 1,500.
The exchange rate now stands at 1:1.7, which means that the item is now worth DEM 1,700, an increase of DEM 200.
Since inflation is running at 10%, DEM 150 can be attributed to the general inflation effect (DEM 1,500 × 10% = DEM 150). The increase due to the exchange rate is thus DEM 50.
You now have an inflation adjustment of DEM 150 and a foreign exchange gain of DEM 50.