fcv

1. Things to remember in Foreign Currency Valuation
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Hello Everyone!! This is my first blog post on SAP community. I would highly
appreciate feedback and recommendation in comment box.
Introduction:
This blog post will not take you through the customizing of foreign currency
valuation; instead you will learn one or two things differently. I will be explaining
features and functions of FCV in SAP.
Below are the key points we will be looking at:
1. Brief introduction of FCV
2. Scope of FCV
3. How GLs are valuated based on Master data setup?
4. What are the use of KDB and KDF account key?
5. Basics of FAGL_FC_VAL transaction
So let’s get started foreign currency valuation:
When a foreign currency valuation is done in SAP, all open items and balances in a
foreign currency will be converted to local currency using the current exchange rate
maintained in the system.
After taking FCV run SAP creates two postings. One for actual valuation at the
month-end and the other for reversal on the next day i.e. first day of next month
(depends on configuration), but sometimes next period is not open for the reversal
postings, so SAP only creates one posting. Now if you have taken the valuation run
via batch input then you can open the period and continue with the batch run.
If no batch run were selected then have to manually reverse the postings on the next
day with the only transaction code FBB1. This transaction does not post balance in
other currencies than the local one.
Scope of Foreign Currency Valuation
Generally, currency valuations cover the following:-
1. Customer open items, Vendor open items, and General Ledger Open Line
items, Managed in foreign currency. (Each document is evaluated separately
and the valuation posted with gain/loss)

2. 2. Other General Ledger Balance Sheet Accounts Managed in Foreign Currency,
but not flagged as open item management accounts. (Only the balance of G/L
account is valuated and gain/loss is posted)
Foreign currency valuation is only done for Balance sheet G/L accounts
We need to determine G/L accounts for open item managed G/Ls and for G/Ls
which are not managed as open item basis:
Figure 1: Snapshot from SAP ECC
The above set up is must if you want to valuate any G/L account.
Exch. Rate Diff. using Exch. Rate Key – KDB :- Here we set G/L account for the
G/L accounts which is not managed as open items
Exchange Rate Dif.: Open Items/GL Acct – KDF :- Here G/L account is set for open
item managed G/Ls
Let’s see the account determination for KDB account key:
Now if we double click on the KDB account key, the system will ask you to enter the
chart of account – so the account is determined on chart of account level, correct?
But in below screenshot you can see, we have option to choose valuation area
(highlighted field)
So we can set G/L account on Valuation area + chart of account level (Note:
Valuation area is optional and mostly G/Ls are not set per valuation area)

3. Figure 2: Snapshot from SAP ECC
Figure 3: Snapshot from SAP ECC
In above screenshot the G/L accounts for realize exchange rate gain and loss are
maintained with exchange rate difference key.
As said earlier this setting is used for the G/L accounts which are not managed as
open items, so now let’s link this customizing to the G/L account:

4. Figure 4: Snapshot from SAP ECC
Here in the control data tab of G/L account, we can assign the exchange rate
difference key. Based on this key; G/L accounts for loss/gain will be determined.
The above G/L account does not have an open item management tick. But even if
this account has that tick, the system will not restrict you to assign this key in G/L
and neither considers it in valuation.
Account determination for account key KDF
This setup is required for open item managed G/L accounts

5. Figure 5: Snapshot from SAP ECC
From the above snapshot, it can be considered that each and every G/L account
needs to be configured, when its managed as an open item basis; unlike the previous
one, where we just create exchange rate keys and then assign it in G/L master data.
Account key KDF can also be maintained on valuation area level.

6. Figure 6: Snapshot from SAP ECC
The highlighted area in the above figure explains how/on what basis G/L accounts
can be determined.
We have below possibilities to set the G/L account:
1. For the G.L account
2. For G/L and currency combination
3. For G/L and currency type combination
There are two options for assigning Loss and Gain G/L accounts:

7. Figure 7: Snapshot from SAP ECC
The G/L accounts which are managed on open item basis, needs a clearing.
For e.g. vendor invoice is booked on 01.01.2020 it is stored as open item and cleared
when payments made against the invoice.
Let’s say the payment against the invoice is made after two months on 04.03.2020
Now when the valuation run is taken on the 31.03.2020 system calculates the
difference between the exchange rate of Invoice booking date and the rate of clearing
date
And the difference is posted to exchange rate difference realized account
(Highlighted in above screenshot)
But what about the valuation runs comes between the invoice booking date and
clearing date:

8. Figure 8: Snapshot from SAP ECC
In the above example invoice was booked on 01.01.2020 and not cleared till
31.01.2020
But still we need to evaluate the balance of vendor in the month end, in order to
have correct financial reporting to local tax authorities.
So this time system calculates the exchange rate difference of invoice date and the
date on which valuation run is taken
And the difference is posted to valuation G/L accounts (highlighted above)
We have one more option to set Balance sheet adjustment account
In most of the cases, we know the valuation difference is calculated and reversed in
the next month, so there might be a requirement to not book these differences on the
same G/L account, instead, post to the separate G/L account.

9. In that case we will assign different Balance sheet adjustment account otherwise the
same G/L Account should be maintained.
And now the last section: Translation –
Figure 9: Snapshot from SAP ECC
This field is used to translate the balances into group currency. We will discuss this
in separate blog.
Transaction FAGL_FC_VAL

10. Figure 10: Snapshot from SAP ECC
If the create posting is not ticked then transaction will be executed in test mode
Executing the transaction with batch input session helps many times, several times
error does not appear in a test run and comes at the time of direct posting
In those cases system stores the data in batch input which is not posted and you can
rectify the error and run the session

11. Figure 11: Snapshot from SAP ECC
Variant configured here impacts on the displayed output after executing the
transaction. We can configure user-friendly variant, easily as per the requirement.
If the save log button is not ticked, then it’s almost impossible to track the valuation
runs, so make sure the end-user is applying this check-in each evaluation.
Conclusion
This brings us to an end of this blog post. We will quickly recap the points covered
here:
1. FAGL_FC_VAL valuates the Balance sheet GL items and the valuation
difference is posted to different accounts based on Master data setup and
configuration
2. Valuation run ended with errors can be processed further from batch input
3. Save the logs of each valuation run to identify/revisit the errors
Hope you like reading this blog, do mention your suggestions in comment section.