Foreign Currency Revaluation

Example: Invoice posted at rate of 1.50. Therefore, AR has a debit balance of 1,500.00. After Revaluation at rate of 1.20: Dr Unrealized Gains/Losses 300 Cr AR 300 After Year-End Closing posting: The balance in the Forex Gains/Losses is zero as it has been closed off against the Retained Earnings: Dr Retained Earnings 300 Cr Unrealized Gains/Losses 300 Upon subsequent posting of payment at the rate of 1.60: Dr Cash 1,600 Cr AR 1,200 Cr Unrealized Gains/Losses 300 Cr Realized Gains/Losses 100 As a result of this, the Unrealized Gains/Losses will have an incorrect balance of –300.00. Is there a logical accounting reason for this? It seems to me that the entries relating the Unrealized Gains/Losses account after the year-end journal posting has to be reversed in the new-year accounts. I would like to know how others are handling this.

Hi, As I understand this is 100% RIGHT. You will close this account at the end of the next year. Valentin Gvozdev BMI Inc.

Dear Osman, Its a very interesting argument. But as the name of the account itself suggests it is an unrealized gain. When you had revalued at 1.2 you had unrealized loss thinking that you will have a loss of 0.4. But apparently the forex rate went up and became 1.6. So you had an unrealized gain. Therefore this unrealized gain has to be credited in the subsequent year. Now you may ask me how can it be unrealized when you have already realized it? But the answer lies in the fact that you had revalued your receivables in the year end and hence you had not expected to earn this gain. Cheers, rohith Rohith Kamath Senior Consultant The Naviworld Group

hi, i have a global dimension code set as code mandatory on all realised/unrealised gain/loss general ledger account. on all my purchase/sales invoice processing, the global dimension code is applied. on running the batch adjust exchange rate, the system asks for the global dimension value. should it get the dimension from invoices??? any suggestions

Which version are you using? If I remember well, this dimension handling for the currency revaluation was introduced with 3.70, version 3.60 had the problem that dimensions were neither take from invoices nor from the accounts… Saludos Nils