## Performing Monetary Account Valuation

This chapter provides overviews of monetary account valuation for bank accounts and monetary valuation for open invoices and vouchers and discusses how to calculate unrealized gains and losses on monetary accounts.

### Understanding Monetary Valuation for Bank Accounts

If you work with foreign currencies, you need to revalue the monetary accounts to reflect current exchange rates by running the Monetary Account Valuation program (R09415). Monetary accounts, which are typically bank accounts, are accounts that accept only transactions in a specific currency. You assign a currency to the account master record in the F0901 table. This limits transactions to that specific currency.

The Monetary Account Valuation program also processes accounts with blank currency codes in the F0901 table if the accounts fall within the range for AAI item PBC. This AAI specifies account ranges for posting by currency. Unlike accounts that are assigned a specific currency, these accounts allow balances in multiple currencies.

You use the Monetary Account Valuation program to calculate the current domestic value of a foreign currency amount and determine the unrealized gain or loss due to exchange rate fluctuations. The calculation determines what the gain or loss would have been if you had converted the foreign balance to the domestic currency.

In many countries, accounting rules specify that you report unrealized losses, but not unrealized gains. You can set a processing option in the Monetary Account Valuation program to create journal entries only for losses. You can also set the processing option to create journal entries for gains only, or for both gains and losses.

In the United States, accounting rules (SFAS 52) specify that you report both unrealized gains and unrealized losses.

The journal entry document type is JX (foreign currency revaluation). This document type adjusts only the domestic side (AA ledger) of a monetary account and leaves the foreign side (CA ledger) unchanged.

Example: Monetary Account Valuation

Assume that the company is located in Great Britain and its base currency is British pounds (GBP). You need to pay several suppliers in Hong Kong dollars (HKD), so you establish a monetary bank account in HKD.

At the end of the month, you have 1,000,000.00 HKD in the bank account in Hong Kong. The account balance in the actual amounts (AA) ledger is 80,268.00 GBP. This account balance is based on the exchange rates of the individual transactions in the AA ledger. You must revalue the foreign bank account balance in the company currency using the exchange rate that is in effect at the end of the month, which is 1 HKD = 0.078996 GBP.

When you run the Monetary Account Valuation program, the system creates a reversing journal entry for an unrealized loss of 1,272.00 GBP. The account balance in the AA ledger is now 78,996.00 GBP. On the first day of the following month, the system will reverse the journal entry and you can revalue the account again.

### Understanding Monetary Valuation for Open Invoices and Vouchers

These reports provide information for monthly valuation of open invoices and vouchers, but do not calculate unrealized gains and losses:

- Open A/R Details (P03B429)

- Open A/P Details (P04427)

These reports calculate unrealized gains and losses on open invoices and vouchers:

- A/R Unrealized Gain/Loss Report (R03B426).

- A/P Unrealized Gain/Loss Report (R04425).

See Generating the A/R Unrealized Gain/Loss Report.

### Calculating Unrealized Gains and Losses on Monetary Accounts

This section provides an overview of the Monetary Account Valuation program, lists prerequisites, and discusses how to:

- Calculate unrealized gains and losses on monetary accounts.

- Set data selection for Monetary Account Valuation.

- Set processing options for Monetary Account Valuation (R09415).

#### Understanding the Monetary Account Valuation Program

Typically, you run the Monetary Account Valuation program (R09415) at the end of a fiscal period and calculate unrealized gains and losses prior to running financial statements. The program creates journal entries with a document type of JX (foreign currency revaluation) for the unrealized gains and losses.

The Monetary Account Valuation program calculates unrealized gains and losses as follows:

1. Compares the currency code of selected accounts with the currency code of the company with which the account is associated. Stated another way, it compares foreign balances in the foreign currency (CA) ledger with domestic balances in the actual amounts (AA) ledger.

2. Retrieves an exchange rate from the F0015 table based on the comparison, using the as of date specified in a processing option.

3. Multiplies or divides the original foreign balance by the exchange rate to compute the new domestic balance.

4. Compares the new domestic balance with the original domestic balance to calculate the unrealized gain or loss.

The Monetary Account Valuation program creates a journal entry to record the unrealized gains and losses. The journal entry contains the currency code of the company and is a reversing entry because the gain or loss is not realized. It applies to the end of the period only.

The Monetary Account Valuation program prints a report that lists:

- Domestic (AA) and foreign (CA) ledger balances as of the transaction date

- Current domestic value of the ledger balances using the as of date that is specified in the processing options

- Unrealized gain or loss amount

You can set the level of detail in a processing option and use this report as a trial balance that displays both foreign and domestic amounts.

Important! If you rerun the Monetary Account Valuation program, ensure that the journal entries created by the program are posted or the program will create duplicate journal entries.

#### Prerequisites

Before you complete the tasks in this section:

- Enter new exchange rates.

  See Setting Up Exchange Rates.

- Verify that AAI items GV, GW, and GR are set up correctly.

  See Setting Up AAIs for Unrealized Gains and Losses on Monetary Bank Accounts.

- Verify that monetary accounts are set up correctly.

  See Setting Up Monetary Accounts.

#### Calculating Unrealized Gains and Losses on Monetary Accounts

Select Monthly Valuation (G1121), Monetary Account Valuation.

Use version XJDE0001 to perform monetary account valuation on monetary accounts. (Version XJDE0002 is used for non-monetary accounts for posting balances by currency.)

#### Setting Data Selection for Monetary Account Valuation

You should use the data selection criteria provided in version XJDE0001. The data selection for Currency Code - From is not equal to blank. Be aware that if the report includes more than one currency, no total amount exists for the Foreign Ledger Balance column on the report. The amount would be meaningless because of the mixed currencies.

#### Setting Processing Options for Monetary Account Valuation (R09415)

Processing options enable you to specify the default processing for programs and reports.

LOD

1. Account Level of Detail | Specify the lowest account level of detail to print on the report. Enter a specific account level of detail between 3 and 9. For example, if you specify level 7 as the lowest level of detail and the chart of accounts includes levels 8 and 9, level 7 will include the totals for accounts that have amounts at levels 8 and 9, but the detail for levels 8 and 9 will not print. Level 1 represents the company level and level 2 represents the business unit level. Levels 1 and 2 always print on the report. If you leave this processing option blank, the system prints all account levels of detail.

Period

1. Fiscal Year and 2. Period Number | Specify the last two digits of the fiscal year for which the system will perform monetary account valuation. Specify the two digits of the fiscal period. For example, to perform monetary account valuation for July, 2006, enter 06 for the fiscal year and 07 for the period number. If you leave these processing options blank, the system uses the current fiscal year and period defined in the F0010 table for the company of each account that is processed.

Print

1. Account Number Format | Specify the format for printed account numbers. Values are: 1: Standard account number. The default format is business unit.object.subsidiary. 2: Account ID. The system assigns this number when the account is entered. 3: Free-form (third account number). You assign this number during account setup. If you leave this processing option blank, the system uses the standard account number.
2. Suppress Zero Balances | Specify whether to omit printing accounts with zero balances. Values are: Blank: Print all accounts. 1: Do not print accounts with zero balances Note. Only accounts that have associated currency codes will print, regardless of how you set this processing option.

Subledger

1. Subledger and 2. Subledger Type | Enter a specific subledger number to perform monetary account valuation for the accounts associated with that subledger number. Other values are: Blank: The system processes only accounts without subledgers. *: The system processes all accounts. If you enter a value for the Subledger processing option but do not enter a value for the Subledger Type processing option, the system disregards what you enter in the Subledger field and processes only accounts without subledgers, unless you enter * for the Subledger processing option. If you enter *, the system processes all accounts and all subledgers. If you enter a value for both the Subledger and Subledger Type processing options, but the subledger type is not a valid for the subledger that you enter, the system disregards what you enter and processes only accounts without subledgers.

As Of

1. As Of | Specify the date of the exchange rate that the system uses to perform monetary account valuation for the company of each account that is processed. The system uses the exchange rate in the F0015 table for the date that you specify. If a company has more than one currency code assigned to its monetary accounts, the system uses the specific exchange rate for each currency. If you leave this processing option blank, the system uses the exchange rate for the last day of the period that you entered in the Period Number processing option. If the Period Number processing option is blank, the system uses the last day of the current period defined in the F0010 table for the company of each account that is processed.

Journal Entries

1. Gains/Losses | Specify whether the system creates journal entries for accounts with calculated gains or losses from monetary account valuation. AAI item GVxxx determines the accounts in which the system will create journal entries for calculated gains and AAI item GWxxx determines the accounts in which the system will create journal entries for calculated losses. Values are: Blank: Do not create journal entries 1: Create journal entries for accounts with both calculated gains and calculated losses 2: Create journal entries only for accounts with calculated losses. 3: Create journal entries only for accounts with calculated gains.
2. Reversing Entries | Specify whether the system creates reversing journal entries for accounts with calculated gains or losses. Values are: Blank: Create reversing journal entries. 1: Do not create reversing journal entries.
3. G/L Date (general ledger date) | Specify the date to use for the journal entries that the system creates during monetary account valuation. If you leave this processing option blank, the system uses the last day of the period that you entered for the Period Number processing option. If that processing option is blank, the system uses the last day of the current period as defined in the F0010 table for the company of each account that is processed. If you leave the Gains/Losses processing option blank, the system will not create journal entries even if you enter a date for this processing option.
4. Approve Batches | Specify whether to create the batches of journal entries with a status of approved, regardless of the management approval setting on the General Accounting Constants form. Values are: Blank: Use the management approval constant on the General Accounting Constants form to determine whether management approval is required. 1: Create journal entry batches in approved status If you set the Gains/Losses processing option to create journal entries, you can use this processing option to automatically approve the journal entry batches. Otherwise the system ignores this processing option.

Errors

1. Print Errors | Specify whether to print error messages on the report. If you leave this processing option blank, the system send error messages to the work center. Values are: Blank: Send error messages to the work center. 1: Print error messages on the report.