- Clearing of invoices in foreign currency with payments in local currency does not function properly, as evidenced by unexpected differences in amounts posted. This situation started to appear in Release 2.2, whereas the clearing of such items in Release 2.1 did function properly.
- In clearing/payment documents booked in local currency, different amounts are shown in the line items if the display is switched between local and document currency. This occurs even though the two currencies are identical.
As of Release 2.2, clearing in a third currency is generally possible. The clearing technique was converted for this purpose.
Up to Release 2.1, foreign currency items could only be cleared in that foreign currency or in the local currency. When clearing in local currency, items were sometimes posted partially incorrectly. This was fixed in Release 2.2.
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CAUTION: This note was updated on 4/20/95. As of Release 2.2E, you
can define how foreign currency document clearings in local currency
should be carried out. You can select settings in such a way that the
procedures used in Release 2.1 can be implemented once again.
You carry out these configurations from the 'Global company code data'
screen.
The following explanation of the clearing logic is appropriate for
Releases 2.2A-2.2D as well as further releases, as long as the company
code settings remain unchanged.
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Following is a description of the logic for clearing invoices in a third currency. Local currecy is the Deutsche Mark and the invoice currency is the US dollar. Two payment scenarios are given, one is a payment in a third currency (French Franc), and the other a payment in local currency (DM).
Invoice on 4/1/95 of 1000 USD = 1500 DM ( USD/DM rate = 1,50 )
Payment on 5/1/95 of 4900 FF ( USD/DM rate = 1,40
FF/DM rate = 0,28 )
Since the clearing is carried out in a currency other than that of the
invoice, it must then be determined how many FF are needed on 5/1/95 to
settle an invoice of 1000 USD. Following is the result of the conversion:
1000,00 USD = 1400,00 DM ( Rate 1,40000 )
1400,00 DM = 5000,00 FF ( Rate 0,28000 )
In this case, there is an underpayment of 100 FF. You must decide here
if the difference will be successfully posted or carried over, for
example, as a residual item. The result is the following posting
document:
Document currency FF Local currency DM Update in
General Ledger
Incoming payment 4900,00 1372,00 ( 4900,00 FF )
Customer clearing 5000,00 1500,00 ( 1000,00 USD)
Underpayment expense 100,00 28,00 ( 100,00 FF )
Loss from rate fluct. 0,00 100,00 ( 0,00 USD)
If DM 1372 had been paid instead of 4900 FF, there would have been
no difference between the two postings, because both amounts had
the same value as of 5/1/95. You would not have calculated how many
FF would be required to clear 1000 USD here, but rather how many DM.
On 5/1/95, that would have been DM 1400.
Document currency DM Local curr. DM Update in General
Ledger
Incoming payment 1372,00 1372,00 ( 1372,00 DM )
Customer clearing 1400,00 1500,00 ( 1000,00 USD )
Underpayment expense 28,00 28,00 ( 28,00 DM )
Loss from rate fluct. 0,00 100,00 ( 0,00 USD )
In contrast to Release 2.1, not the historic DM value (1500), but the current value (DM 1400) is considered as the amount to be cleared. This is the correct way to view the amount because you are dealing with a foreign currency receivable, and any exchange rate losses or gains which may occur need to be eliminated.
The gain/loss amount is only dependent upon changes which may have occurred in the ratio of the invoice and local currencies at the time the payment is made. Changes in the ratio to the payment currency do not have an effect on this gain/loss amount.
You will notice that, in the customer clearing line in the example above, the item includes two different DM amounts. The first amount (DM 1400) is not used for updating G/L transactgion figures, but rather the USD 1000 amount is used for this purpose. As of Release 3.0, this amount will also be displayed in the line item on the additional information screen.
The differences between Release 2.1 and 2.2 then, are particularly evident if you assume a payment not of DM 1372, but of DM 1500. In Release 2.1, this payment could be cleared with the invoice with an amount of USD 1000 (DM 1500 at the time of invoicing). No difference postings were generated.
This procedure was, however, incorrect. At the time of payment, 1071,43 USD would correspond to DM 1500, and a payment of 1071,43 would result in an overpayment of USD 71,43 (=DM 100). Whether you post this overpayment to the profit and loss, or to the customer account as a residual item, is irrelevant.
In Release 2.2 an overpayment of DM 100 is correctly recognized, which you must post somewhere (i.e., in the profit and loss or as a residual item to the customer account). The overpayment is represented in the resulting posting document:
Document currency DM Local currency DM Update in
General Ledger
Incoming payment 1500,00 1500,00 ( 1500,00 DM )
Customer clearing 1400,00 1500,00 ( 1000,00 USD )
Gain from overpayment 100,00 100,00 ( 100,00 DM )
Loss from rate fluct. 0,00 100,00 ( 0,00 USD )
You then manually post the 'gain from overpayment' item.
The clearing technique described above is used for G/L as well as customer and vendor accounts. This can cause problems if clearing accounts are involved for which a foreign currency posting is typically cleared by a posting in local currency.
Example: 1000 USD (1500DM) is posted to the debit side of a clearing account and DM 1500 to the credit side. After some time, these items are supposed to be cleared. The clearing should be carried out in USD.
Since the USD/DM rate has changed in the meantime, the program determines the current value of USD 1000 as DM 1400. The two items cannot be cleared then, because the countervalue to the DM 1500 posting is now DM 1400.
As of Release 3.0, it is possible to set up the master records for such clearing accounts so that transaction figures will only be updated in local currency. Consequentially, the conversion of the USD amount described above, which is undesirable in this case, is omitted.
This feature of Release 3.0 cannot be implemented in advance for 2.2 because an enhancement to the G/L master record was involved. It is, however, possible to implement a programming change which allows all G/L accounts to be cleared without undergoing a renewed conversion of the items previously posted in a foreign currency. This programming change is described in R/3 note number 16132.
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