## Processing Automatic Payments in a Foreign or an Alternate Curreny

This chapter provides an overview of automatic payments in a foreign or alternate currency and discusses how to:

- Create payment groups in a foreign and an alternate currency.

- Write and update foreign and alternate currency payment groups.

- Post foreign and alternate currency payments

### Understanding Automatic Payments in a Foreign or an Alternate Currency

You can write automatic payments in the foreign (transaction) currency of a voucher or in an alternate currency, which is a currency different from the domestic or foreign currency of a voucher.

With the flexibility of alternate currency payment processing, you can enter a voucher in one currency and issue payment in a currency that is different from the transaction currency of the voucher and the domestic currency of the company. For vouchers that are domestic currency only and for vouchers that are foreign currency, this prevents you from having to void the original voucher and enter a new voucher in the same (alternate) currency as the payment.

Most of the processing considerations for foreign and alternate currency payments are based on the AAI and processing option setup that you do before you actually write the payments. The ability to write automatic payments in a foreign or alternate currency is controlled by processing options in these programs:

- Create Payment Control Groups (R04570)

- Work with Payment Groups (P04571)

You designate the foreign or alternate currency in which you want to create payments in the processing options for the Create Payment Control Groups program. For alternate currency payments, the system converts the selected vouchers to the alternate currency amount using the exchange rate for the domestic to alternate currency or the foreign to alternate currency in the F0015 table.

If a voucher is assigned a monetary bank account, the bank account currency does not have to be the same as the transaction currency of the voucher when you process automatic payments in an alternate currency.

When you write payments in a foreign currency using the Work with Payment Groups program, the system calculates each payment amount by adding the total amount of the vouchers in the transaction currency.

When you write payments in an alternate currency, the system calculates the payment amount as follows:

- It adds the total amount of the vouchers in the transaction currency. The transaction currency can be either domestic or foreign.

- It uses the exchange rate between the transaction currency and the payment currency to calculate the alternate currency amount. The system retrieves the exchange rate from the F0015 table.

For example, a French company receives an invoice for 2,000.00 Canadian dollars (CAD) and pays in U.S. dollars (USD), an alternate currency. To calculate the payment amount, the voucher (supplier's invoice) is divided by the exchange rate (1.514692) as follows:

2,000.00 ÷ 1.514692 = 1,320.40 USD

Alternate currency payment amounts are stored in the Accounts Payable - Matching Document table (F0413). The currency in the F0413 table will be different from the currency in the Accounts Payable Matching Document Detail table (F0414) because an alternate currency payment is involved. The historical exchange rate stored in the F0414 table contains the exchange rate that is used to calculate the alternate currency amount from the foreign currency.

If an error occurs when you write payments, a message appears after you enter the payment date. The error message that is specific to foreign and alternate currency payments is Currency exchange rate not found.

Currency Symbols on Automatic Payments

When you write payments, the system prints amounts either with or without a dollar currency symbol ($) depending on the print program assigned to the default payment instrument.

The dollar currency symbol prints only on payments in which the Print Automatic Payments - Standard Format (R04572) print program is assigned to the default payment instrument. The R04572 print program is hard coded to print the dollar currency symbol. All other print programs print amounts without a currency symbol. For example, assume payment instrument R is set up for French payments and calls the R04572F2 print program. The system will print the payment with euro amounts but no currency symbol.

When you assign a print program to a payment instrument, you assign the program number with the prefix P instead of R, for example P04572, P04572F2, and so on. P04572 and R04572 refer to the same program; R04572 is the UBE which actually prints the payment.

Dates and Exchange Rates for Automatic Payments

When you write automatic payments, you specify the exchange rate to use based on:

- The general ledger date of the payment and its corresponding rate.

  The system retrieves the exchange rate for the general ledger payment date from the F0015 table. A gain or loss might be calculated.

  For this example, the general ledger payment date is June 15 and the exchange rate for that date is 2.27542.

  Transaction | Foreign Amount | Exchange Rate | Domestic Amount
  Voucher | 500.00 GBP | 2.27650 | 1,138.25 CAD
  Payment | 500.00 GBP | 2.27542 | 1,137.71CAD

  The domestic voucher amount is 1,138.25 CAD and the domestic payment amount is 1,1371.71 CAD, which results in a realized gain of + 0.54 CAD.

- The specific effective date and corresponding rate.

  The system retrieves the exchange rate for the date you specify from the F0015 table. A gain or loss might be calculated.

  In this example, you specify an effective date of June 30 and the exchange rate for that date is 2.28551.

  Transaction | Foreign Amount | Exchange Rate | Domestic Amount
  Voucher | 500.00 GBP | 2.28478 | 1,142.39 CAD
  Payment | 500.00 GBP | 2.28551 | 1,142.76 CAD

  The domestic voucher amount is 1,142.39 CAD and the domestic payment amount is 1,142.76 CAD, which results in a realized loss of –0.37 CAD.

- The voucher exchange rate.

  The system uses the exchange rate that was in effect at the time you entered the voucher. There is no gain or loss calculated because the voucher domestic amount is equal to the payment domestic amount.

  In this example, the exchange rate for the voucher is 2.67823. That same exchange rate is used for the payment.

  Transaction | Foreign Amount | Exchange Rate | Domestic Amount
  Voucher | 500.00 GBP | 2.67823 | 1,339.12 CAD
  Payment | 500.00 GBP | 2.67823 | 1,339.12 CAD

You specify the date and exchange rate in the processing options for the Work with Payment Groups program.

Automatic Payment Drafts in a Foreign Currency

To process foreign currency automatic payments using drafts, you create a payment group based on the foreign amount of the vouchers using the Create Payment Control Groups program. When writing and updating the payment group, the system creates the paper draft with the foreign currency amount.

See Processing Accounts Payable Drafts.

### Creating Payment Groups in a Foreign and an Alternate Currency

This section provides an overview of payment groups in a foreign or alternate currency, lists prerequisites, and discusses how to:

- Create payment groups in a foreign or alternate currency.

- Set data sequencing for Create Payment Control Groups.

- Set multicurrency processing options for Create Payment Control Groups (R04570).

#### Understanding Payment Groups in a Foreign or an Alternate Currency

Before you write payments, you must create payment groups using the Create Payment Control Groups program. For foreign and alternate currency payments, you use processing options to group vouchers by:

- The bank account assigned to the voucher or an override bank account.

- The payment currency (domestic, foreign, or alternate).

- The payment instrument.

By grouping vouchers in this way, you can create a payment group that includes different currencies and bank accounts. Additionally, you can create payment groups and pay them from a bank account that deals specifically in a foreign or alternate currency.

Alternate Currency Error Messages

If an error occurs when you create a payment group, a message prints on the Create Payment Control Groups report. For example, an error message prints if you try to create a payment group in the euro using a Canadian bank account.

These error messages are specific to alternate currency payments:

- Alternate currency clearing account is invalid or is a monetary account.

- Alternate currency clearing account company is not the same as the transaction company.

- AAI for alternate gain/loss account is invalid.

- Alternate currency gain/loss account company is not the same currency as transaction company.

- The currency of the alternate payment did not match the currency of the bank account.

Currency Methods for Automatic Payments

When you create payment groups, specify one of these currency methods to use for automatic payments:

- Bank Account's Monetary Unit

- Voucher Domestic Currency

- Voucher Foreign Currency

- Current Domestic Amount

- Alternate Currency Amount

You specify the method in the Payment Currency processing option for the Create Payment Control Groups program.

Bank Account's Monetary Unit

When you select the Bank Account's Monetary Unit method, the currency in which you pay vouchers depends on whether the bank account assigned to the voucher is a monetary or non-monetary account. This table describes these types of bank accounts:

Type of Bank Account | Description
Monetary bank account | A monetary bank account is an account that is assigned a currency code. For vouchers assigned a monetary bank account, you pay in the currency of the bank account. For example, you enter a foreign currency voucher in CAD for a company that has a base currency of USD. The bank account that you assign to the voucher is a monetary account with a currency code of CAD. If you select the Bank Account's Monetary Unit method, you pay the foreign amount of the voucher in the foreign currency (CAD). The system might calculate a gain or loss between the foreign and domestic currency amounts based on: The GL date specified in the processing option for the Work with Payment Groups program. The system uses this date to locate the exchange rate in the F0015 table. The exchange rate effective date specified in the processing option for the Work with Payment Groups program. If you leave this processing option blank, the system uses the GL date.
Non-monetary bank account | A non-monetary bank account is an account that is not assigned a currency code (the currency code for the bank account is blank). For vouchers that are assigned a non-monetary bank account, you pay the foreign amount of the voucher in the domestic currency. For example, you enter a foreign currency voucher in CAD for a company that has a base currency of USD. The bank account that you assign to the voucher is not a monetary account. If you select the Bank Account's Monetary Unit method, you pay the domestic amount of the voucher in the domestic currency (USD). The system does not calculate a gain or loss because the voucher is paid in the domestic currency.

Voucher Domestic Currency

When you select the Voucher Domestic Currency method, you pay in the domestic currency of the voucher.

For example, you enter a foreign currency voucher in CAD for a company that has a base currency of USD. You enter a domestic currency voucher in USD for the same company. If you select this method, you pay the domestic amount of both vouchers in the domestic currency (USD).

The system does not calculate a gain or loss because the vouchers are paid in the domestic currency.

Voucher Foreign Currency

When you select the Voucher Foreign Currency method, you pay in the foreign currency of the voucher.

For example, you enter a foreign currency voucher in CAD for a company that has a base currency of USD. You enter another foreign currency voucher in CAD for a company that has a base currency of GBP. If you select this method, you pay the foreign amount of both vouchers in the foreign currency (CAD).

The system calculates a gain or loss between the foreign and domestic currency based on:

- The GL date specified in the processing option for the Work with Payment Groups program. The system uses this date to retrieve the exchange rate in the F0015 table.

- The exchange rate effective date specified in the processing option for the Work with Payment Groups program. If you leave this processing option blank, the system uses the GL date.

Current Domestic Amount

When you select the Current Domestic Amount method, you pay the current domestic amount of the voucher in the domestic currency.

For example, you enter a voucher in USD for a company that has a base currency of CAD. If you select the Current Domestic Amount method, you pay the domestic amount of the voucher in the domestic currency (CAD). Unlike the Voucher Domestic Currency method, which does not calculate a gain or loss, the system calculates a gain or loss if the exchange rate at the time that you enter the voucher is different from the exchange rate at the time that you pay the voucher.

Unlike some other methods, the system does not use the processing option for the GL date or the exchange rate effective date. Instead, it uses the current (the system date) exchange rate in the F0015 table. If a current exchange rate is not set up, the system uses the previous exchange rate as illustrated in this example:

Date | Exchange Rate
June 1 | 1.5
June 15 | 2.0
June 30 | 2.5

If you pay the voucher on June 10 (current date), the system uses the exchange rate for June 1 (1.5), because no exchange rate for June 10 exists. Similarly, if you pay the voucher on June 29, the system uses the exchange rate for June 15 (2.0). In both examples, the system uses the exchange rate associated with the previous date.

Alternate Currency Amount

When you select the Alternate Currency Amount method, you do not pay in the domestic or foreign currency of the voucher; instead, you pay in an alternate currency.

For example, you enter a foreign currency voucher in CAD for a company that has a base currency of USD. You specify JPY in the Alternate Currency processing option. You pay the voucher in JPY, which is neither the foreign currency (CAD) nor the domestic currency (USD).

When you pay a voucher in an alternate currency, you pay the transaction amount of the voucher. The transaction amount is the foreign amount if the voucher is foreign and the domestic amount if the voucher is domestic only.

The system might calculate a gain or loss based on:

- The GL date specified in the processing option for the Work with Payment Groups program. The system uses this date to retrieve the exchange rate in the F0015 table.

- The exchange rate effective date specified in the processing option for the Work with Payment Groups program. If you leave this processing option blank, the system uses the GL date.

#### Prerequisites

Before you complete the tasks in this section:

- Set up automatic accounting instructions (AAIs) for gains and losses.

  See Setting Up AAIs for Realized Gains and Losses on Foreign Currency Payments.

- Set up AAIs for payable bank accounts.

  See Setting Up AAIs for Payable Bank Accounts.

- Set up country-specific payment formats.

  See Setting Up Payment Formats.

- For automatic drafts, set the Payment Currency processing option to the voucher's foreign currency for the Create Payment Control Groups program.

#### Creating Payment Groups in a Foreign or Alternate Currency

Select Automatic Payment Processing (G0413), Create Payment Control Groups.

#### Setting Data Sequence for Create Payment Control Groups

To produce payments that are grouped properly, ensure that the data sequence is set as follows:

1. G/L Bank Account

2. Payment Instrument

3. Check Routing Code

4. Currency Code

#### Setting Multicurrency Processing Options for Create Payment Control Groups (R04570)

This section discusses processing options that are specific to multicurrency processing.

Amounts

2. Currency Code for Range Amounts | Enter a code that specifies the currency for the values you entered in the Payment Amount Range processing option. If necessary, the system converts these amounts to the payment currency of each payment control group. For example, if you enter ranges of 100 to 5,000 in USD, the system converts those USD amounts to EUR for an EUR payment group, to GBP for a GBP payment group, and so on. The conversion allows for the correct minimum and maximum comparisons for all payment groups created each time you run this program.
4. Payment Currency | Specify the currency method that the program uses for payment. Values are: Blank: Pay in the currency of the general ledger bank account. For monetary accounts, this is the currency assigned to the general ledger bank account in the F0901 table. For non-monetary accounts, this is the currency assigned to the company in which the business unit of the general ledger bank account resides. For example, the currency associated with the general ledger bank account 1.1110.BEAR is U.S. dollars (USD) because business unit 1 belongs to company 00001, for which the currency is USD. If you enter vouchers in the euro (EUR) for company 00001, you can either pay the vouchers from the monetary bank account in EUR, or you can pay them from a bank account that belongs to a company for which the base currency is USD. 1: Pay the domestic amount of the voucher in the domestic currency. For example, if you entered the voucher in EUR for company 00001, for which the base currency is USD, the voucher is paid in USD. 2: Pay the foreign amount of the voucher in the foreign currency. For example, if you entered the voucher in EUR for company 00001, for which the base currency is USD, the vouchers are paid in EUR. Vouchers that do not have a foreign currency are paid in the domestic currency. 3: Pay the current domestic amount of a foreign voucher in the domestic currency. For example, if you entered the voucher in EUR for company 00001, for which the base currency is USD, the foreign amount is converted to the current domestic amount based on today's effective exchange rate, and the voucher is paid in USD. 4: Pay the voucher in an alternate currency that is neither the domestic nor foreign currency of the voucher. For example, if you entered the voucher in EUR for company 00001, for which the base currency is USD, but you want to pay the voucher in Canadian dollars (CAD), the voucher is paid in the alternate currency. Designate the payment currency in the Alternate Currency Code processing option. Note. When you specify 2, 3, or 4 in this processing option, the program calculates a gain or loss if the exchange rate of the voucher is different from the exchange rate of the payment. When you make payments in the current domestic currency, the Create Payment Groups program calculates the domestic amounts being paid using the exchange rate that is effective on that day. This rate might be different from the exchange rate that is effective when you actually make the payment.
5. Alternate Currency Code | Enter the code for the alternate currency amount. You enter a value in this processing option only if you specified 4 in the Payment Currency processing option.

### Writing and Updating Foreign and Alternate Currency Payment Groups

This section provides an overview of multicurrency payment groups and discusses how to:

- Set multicurrency processing options for Work with Payment Groups (P04571).

- Write and update payments in a foreign or alternate currency.

#### Understanding Multicurrency Payment Groups

After you create payment groups for foreign or alternate currency payments, you must write the payments and update the Accounts Payable tables with the payment information that you generate. You use the Work with Payment Groups program to review, write, and update payments. You can also use this program to remove payments from the payment group and to reset or undo payment groups, if necessary.

The information in this section discusses multicurrency considerations when working with payment groups.

Updating the Accounts Payable Ledger

When you update a payment group, a Payment Register prints if no errors occurred. If errors occurred, a message prints on the Update Payments Error Report.

These error messages are specific to foreign and alternate currency payments:

- Currency exchange rate not found.

- Exchange rate cannot be changed between writing and updating payments.

See Also

Processing Automatic Payments

#### Forms Used to Work With Payments in a Foreign or Alternate Currency

Form Name | FormID | Navigation | Usage
Work With Payment Groups | W04571A | Automatic Payment Processing (G0413), Work With Payment Groups | Review a list of payment groups and their statuses.
Write Payments | W04572A | On the Work With Payment Groups form, select a payment group and select Write or Update from the Form menu. | Write and update payments in a foreign or alternate currency.

#### Setting Multicurrency Processing Options for Work with Payment Groups (P04571)

This section discusses the processing options that are specific to multicurrency processing.

Display

4. Specify Pre-loaded Values Currency Code | Specify the payment currency that was originally assigned to the payment control group by Create Payment Control Groups program. If you specify a value for this field, you limit the initial inquiry to the payment control groups with this currency code. You can change the selection criteria on the Additional Selection Criteria form. You can enter a specific payment currency code (CRCD), or leave this processing option blank to search on all payment currencies (default).
Display Alternate Currency Amounts | Specify whether you want the system to display the payment control group amounts in the alternate currency. This conversion is for display purposes only, affecting the amounts on the Work With Payment Groups form. For writing foreign payments, complete the processing options on the Currency tab. Values are: Blank: Do not display payment control group amounts in the alternate currency. 1: Display payment control group amounts in the alternate currency.
Alternate Currency Effective Date | Specify the effective date for the alternate currency's exchange rate. If you leave this processing option blank, the system uses today's date (the system date.)

Currency

Effective Date | Specify the date to use to retrieve the exchange rate when you write foreign or alternate currency payments. If you leave this processing option blank, the system uses the general ledger date of the payment. If you create a payment group using the domestic amount of a voucher instead of the foreign amount, the system calculates a currency gain or loss based on the payment date exchange rate. The payment is not a foreign currency payment because it is made in the domestic currency. Note. If you enter an effective date for which there is no corresponding exchange rate in the F0015 table, the system uses the exchange rate on the voucher and, therefore, does not create a gain or loss.
Use Voucher's Rate | Specify whether to use the exchange rate entered on the voucher when you are writing foreign payments. Values are: Blank: Use the exchange rate associate with the effective date entered in the Effective Date processing option. 1: Use the exchange rate from the voucher. If you specify this value, currency gains and losses are not created.

#### Writing and Updating Payments in a Foreign or Alternate Currency

Access the Work with Payment Groups form.

### Posting Foreign and Alternate Currency Payments

This section provides an overview of the post process for foreign and alternate currency payments and discusses how to post foreign and alternate currency payments.

#### Understanding the Post Process for Foreign and Alternate Currency Payments

After you enter manual payments or process automatic payments, you must post them.

When you post foreign or alternate currency payments, the pre-post for the General Ledger Post program (R09801) retrieves the offset method from the Accounts Payable Constants program (P0000). If the offset method is B (batch), the system verifies that there are no foreign or alternate currency payments in the batch. If there is at least one foreign or alternate currency payment, the pre-post changes the offset method for the batch to S (pay item) and continues processing. The pre-post does this because you cannot post using offset method B if one or more payments in a batch are in a foreign or alternate currency.

The General Ledger Post program performs the tasks described in this table in sequential order, regardless of whether you use multicurrency processing. For information specific to posting payments in a multicurrency environment, review the information in the Multicurrency Considerations column:

Task Performed by Payment Post | Multicurrency Considerations
Selects unposted payment transactions from the Accounts Payable - Matching Document (F0413) and Accounts Payable Matching Document Detail (F0414) tables. | None.
Verifies that the batch has an approved status. | None.
Creates automatic offset entries to credit the appropriate bank account for the payment amount in the F0911 table. | None.
Creates automatic offset entries to debit the AP trade account for the payment amount in the F0911 table. | Creates automatic offset entries to debit the AP trade account for the AA (domestic) and CA (foreign) ledgers in the F0911 table.
Currency gains and losses do not apply to non-multicurrency environments. | Creates automatic entries for foreign currency and alternate currency gains and losses.
Slight rounding differences do not apply to non-multicurrency environments. | Creates journal entries for slight rounding differences, if applicable.
Detailed currency restatement does not apply to non-multicurrency environments. | Updates the alternate currency ledger (XA) and, if applicable, the YA and ZA ledgers and produces a separate post report if you enter a version of the Detailed Currency Restatement program (R11411) in the processing options.
Updates balances in the F0902 table. | None.
Updates the posted status to P (posted) in the F0911 table. | None.
Updates the posted status to D (posted) in the F0413 and F0414 tables. | None.
Updates the posted status to D (posted) in the F0011 table. | None.

Slight Rounding Differences Recorded by the Payment Post

When you post foreign or alternate currency payments, the system might create journal entries for slight rounding differences. These slight rounding differences are created when a foreign or alternate currency payment is applied to a voucher and the domestic amount of the voucher is not the same as the domestic amount of the payment. The rounding difference, which is immaterial, is recorded in a realized gain or loss account even though the amounts are not caused by fluctuations in exchange rates.

Typically, rounding differences occur on transactions that involve multiple vouchers and one payment, or multiple payments and one voucher. For these transactions, a rounding difference might occur when the system converts amounts between a foreign and a domestic currency, or an alternate and a domestic currency.

To record the rounding difference, the system creates an offset journal entry in the realized gain or loss account as defined by AAI items PG and PL (for foreign currency payments) and PY and PZ (for alternate currency payments) when you post the payment.

Example: Slight Rounding Differences Recorded by the Payment Post

In this example, a slight rounding difference is recorded on a foreign currency payment. The exchange rate is 1 USD = 1.59570 CAD.

A Canadian company enters three foreign currency vouchers for 750.00 USD each (1,196.78 CAD each). The Canadian company issues payment for 2,250.00 USD (3,590.33 CAD). When the company applies the domestic payment amount (3,590.33 CAD) to the domestic vouchers (1,196.78 × 3 = 3,590.34 CAD), the system records a slight rounding difference of –0.01 CAD.

#### Posting Foreign and Alternate Currency Payments

Use one of these navigations:

- Select Automatic Payment Processing (G0413), Post Payments to G/L.

- Select Manual Payment Processing (G0412), Post Manual Payments to G/L.

You can also post manual or automatic payments using the Review Payments or Automatic Payment Review program by selecting a batch, and then selecting Post by Batch from the Row menu.