Foreign Currency Value Adjustment (SAP Business One)

The foreign currency value adjustment refers to the accounting revaluation of open foreign currency items as at the balance sheet date. This involves recognising existing balances of receivables, liabilities, bank accounts and other relevant G/L accounts denominated in a foreign currency. Foreign currency to the current Closing rate (closing rate). The aim is to recognise these items in the balance sheet at their realistic value in Local currency to be recognised.

E-invoicing in Germany: How to implement the obligation with SAP Business One

Purpose and context:
As foreign currency items in SAP Business One are recognised by default with the Exchange rate If an asset or liability is recognised at the date of the original entry, differences arise between this historical exchange rate and the actual market value on the balance sheet date due to exchange rate fluctuations. The foreign currency value adjustment offsets these differences and ensures that the balance sheet reflects a realistic asset and income situation.

Affected items:
Foreign currency value adjustments typically relate to the following account types:

Open receivables opposite accounts receivable in foreign currency
Outstanding liabilities to creditors in foreign currency
Bank accountswhose balances are denominated in foreign currency
Other general ledger accountsthat are managed in foreign currency
Stocksif items were purchased and valued in foreign currency

process in SAP Business One:
In SAP Business One, the foreign currency value adjustment is typically carried out via the specific function:

Finance → Period-end closing → Exchange rate differences

The system automatically generates booking proposals to compensate for unrealised exchange rate differences. Each of these proposals can be checked, accepted or rejected. This process therefore differs from manual journal adjustment postings, which are common in the case of value adjustments for doubtful debtors.

Realised vs. unrealised differences:

Realised differences:
Occur with actual payments and are recognised automatically (e.g. with incoming or outgoing payments in foreign currency).
Unrealised differences:
Arise from revaluation at the balance sheet date and are recognised through the above-mentioned function "Exchange rate differences" booked.

Effects on the financial statements:
The foreign currency value adjustment is an integral part of the periodic financial statements and affects both the balance sheet and the income statement. It ensures that the foreign currency balances recognised correspond to the economic reality and that any exchange rate gains or losses are presented transparently.

Versino Financial Suite

the Versino Financial Suite makes foreign currency value adjustments in SAP Business One more efficient, transparent and legally compliant. It automates the import of exchange rates, improves the overview and documentation and thus supports modern, error-free closing work in an international environment.