Start of Content Area

Function documentation Inflation Adjustment of Open Items in Foreign Currency  Locate the document in its SAP Library structure


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 Foreign Currency Valuation program.


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.


On the selection screen, you specify:


Assuming you valuate and adjust the open items for inflation, the program:

  1. Valuates the open items using the standard program (see Foreign Currency Valuation)

When it has done so, it:

The exchange rate difference is only present in the local currency, not in any parallel currencies.

  1. Calculates the inflation on the open items using the general inflation index
  2. Splits the difference between the inflation adjustment amount and the valuation amount (see example below)
  3. Deletes the data file from step 1.

The transaction currency of the split postings is always the transaction currency of the valuated item, that means, the foreign currency.


This graphic is explained in the accompanying text

  1. On 31 July you post an open receivable for USD 1,000.
  2. 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.

  3. One month later, on 31 August, you run the Inflation Adjustment of Open Items in Foreign Currencies program, which:
    1. Valuates the receivable using the new exchange rate
    2. 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.

    3. Credits the foreign exchange difference revenue, DEM 200, to the account for foreign exchange gains or losses and debits it to the account for balance sheet adjustments
    4. Calculates how much of the DEM 200 has resulted from inflation and how much is due to fluctuations in the exchange rate
    5. 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.

    6. Credits the inflation adjustment amount to the foreign exchange gain or loss account and debits it to the inflation gain or loss account

You now have an inflation adjustment of DEM 150 and a foreign exchange gain of DEM 50.