Closing rate (SAP Business One)

Of the Closing rate (also as Final course is the amount used as of the balance sheet date. Exchange rate, which is used to remeasure items denominated in foreign currencies. By measuring at the current closing rate, foreign currency items in the balance sheet are presented realistically.

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Purpose and timing:
Open foreign currency items are revalued at the end of each accounting period, particularly in the annual financial statements, as their original exchange rate often does not correspond to the current market value. The closing rate makes it possible to properly recognise exchange rate gains or losses.

Affected accounts:
The revaluation usually relates to the following foreign currency items:

Open receivables
Outstanding liabilities
Foreign currency bank accounts
Other G/L accounts that are managed in foreign currency

process in SAP Business One:
SAP Business One supports key date valuation with this function:

Finance → Period-end closing → Exchange rate differences

This function automatically creates booking proposals for unrealised exchange rate differences, which can be confirmed or rejected manually.

Differentiation from realised differences:

Unrealised differences:
Differences due to revaluation on the reporting date, recognised by the "Exchange rate differences" function.
Realised differences:
Differences that are automatically recognised for payment transactions.

Maintenance of exchange rates:
Current exchange rates must be stored in the system so that the valuation on the reporting date can be carried out correctly. SAP Business One enables the manual or automatic maintenance of exchange rates (e.g. via integration with ECB data).

Relevance in reports:
The application of the closing rate ensures that balance sheet and other reports as at the balance sheet date reflect foreign currency positions correctly and up to date.

Example:
A company has liabilities of USD 10,000 on the balance sheet date, originally recognised at an exchange rate of EUR 1 = USD 1.15 (EUR 8,696). The current closing rate is EUR 1 = USD 1.05, which increases the liability to EUR 9,524. The difference of EUR +828 is recognised as an unrealised exchange loss.