foreign currency
valuation
With the S/4HANA Release 2022, SAP has introduced ‘Advanced Valuation in Financial Accounting’ for both SAP S/4HANA Cloud Private and SAP Cloud Public Edition. This includes a whole range of new features that enable you to optimise your month-end closing and meet accounting-specific requirements such as IFRS 9 (accounting for financial instruments).
The following functions are provided as part of the Extended Valuation:
• Extended foreign currency valuation
• Discounting of non-current assets and liabilities
• Credit risk-based impairment
• Balance sheet reclassification
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What’s new is that all these functions can be carried out using a single app: ‘Schedule General Ledger Jobs’ (App ID F1927).
Consequently, the following transactions will become obsolete as soon as Extended Valuation is activated:
- Breakdown/Reclassification/Balance Sheet Structure – Trial Balance – Analysis (Transaction FAGLF101)
- Additional Valuations/FI Valuation Run (transaction F107)
- Foreign Currency Valuation (transaction FAGL_FCV)
This article deals exclusively with the new foreign currency valuation.
The booking logic: Delta instead of cancellation
Standard foreign currency revaluation:
The familiar reversal posting logic is used here by default (although in a few countries, delta is the standard). The revaluation is posted on the last day of the month and reversed immediately on the first day of the following month.
Extended foreign currency valuation:
Extended foreign currency valuation uses only the Delta logic. The system records the old valuation and, in the following month, posts only the difference (Delta) to the new exchange rate.
Account allocation: Direct posting vs. adjustment account
Standard foreign currency valuation:
Valuation gains and losses are posted to a separate adjustment account. The actual reconciliation account remains unaffected.
Extended foreign currency valuation:
The system posts the valuation directly to the account being valued (e.g. the supplier’s or customer’s reconciliation account). This makes the reconciliation much more transparent, as the valued balance is visible directly on the original account.
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The valuation framework: accounting standards set the pace
Standard foreign currency valuation:
The choice of valuation method or accounting treatment is determined by the so-called valuation area.
Extended foreign currency valuation:
Extended valuation is controlled directly via the accounting policy. This integrates seamlessly into the modern ledger approach of S/4HANA.
Currency reference: Revalues all currencies
Standard foreign currency valuation:
Valuation is carried out only for the configured currency type and its dependent currency types.
Advanced foreign currency valuation:
The system always performs valuation in the functional currency and revalues all other (parallel) currencies accordingly.
Ledger management: Ledger groups are no longer possible
Standard foreign currency valuation:
Offers the flexibility to post to several ledgers simultaneously via a ledger group.
Advanced foreign currency valuation:
Posts to only one specific ledger. Consequently, when mapping multiple accounting standards, several valuation runs must be initiated.
Incorrect items: A full restart is no longer necessary
Standard foreign currency revaluation:
To post incorrect items following correction, the revaluation run must be restarted from the beginning.
Extended foreign currency valuation:
Once the valuation run has been completed, the system generates a results list showing which items were not processed successfully and the reasons why. Once the erroneous items have been corrected, the application job can be restarted to create valuation posting documents for the remaining items.
FAQ:
Can I use both standard valuation and extended valuation side by side?
No, that is not possible. SAP recommends using extended valuation.
What does delta logic, also known as delta posting logic, mean?
This means that the valuation is not reversed in the next period and the next valuation is calculated on the basis of the previous valuation(s).
When is it recommended to activate and use extended valuation in Financial Accounting?
SAP recommends activating and using the extended valuation jobs in Financial Accounting at the start of the financial year.
The enhanced foreign currency valuation in S/4HANA replaces the traditional reversal logic with transparent delta postings, thereby creating a simpler, regulatory-compliant basis for the month-end closing.
Summary
With the new ‘Advanced Valuation in Financial Accounting’ feature, SAP has consolidated all previous functions into a single app. This brings with it numerous improvements, such as the restart function for erroneous line items during foreign currency valuation. Compliance with accounting standards such as IFRS 9 is also made considerably easier.
