Forex Loss/Gain in a Nutshell:

Revaluation is the process of revaluing accounts that have transactions denominated in foreign currency. This is done for the account balance, not individual transactions. Revaluation can be done on any account, but typically, this is done for balance sheet accounts, whose balance is made up of open transactions (ie. Accounts Payable, Accounts Receivable). Revaluation reflects the change in conversion rates between the date of the transaction
and the date of the balance sheet.

When revaluation is run, a journal entry is created that either increases or decreases the functional currency amount for that account, based on the
fluctuation of the exchange rate. The offset for this journal is a predefined Unrealized Gain/Loss Account.

All well said, the above is the scenario in AR/ AP. How do projects come in to picture here ? yes in projects we have funding, revenue and invoices which an be affected due to the forex fluctuations since we can have multi currency billing projects.

This article does not explain you the concepts, but the setup to be done in the Projects side to enable the Realized Loss or gain to be captured for the funding and revenue.

Here are the Steps:


1. Enable the ‘Revaluate Funding’ and ‘Funding Revaluation includes Project Gains and Losses’ options at the project type and project level.

2. Enter the Event types for the Realized Gains and Losses in the Billing Tab of the Project Types window.

3. Setup the Function Transactions for the Realized Gain and Loss accounts for the auto accounting functions ‘Revenue and Invoice accounts’.

  • Step1:

Enable ‘Funding Revaluation Includes Gains and Losses’ in the Projects Implementation Options.

At Project Type level, Enable ‘Revaluate Funding’ and ‘Funding Revaluation includes Gain and Loss’. Associate the Gain and loss event types .

Query the existing project and setup the Funding revaluation options.

Navigation: Project -> Project Options -> Billing Setup

Step 2

Create Event Types with classifications ‘Realized Gains’ and ‘Realized Losses’ and associated them in the Project Types window mentioned above.

Navigation: Projects -> Setup-> Billing -> Event Types

Step 3

Now we need to setup the Realized Gain and Loss Rules in Auto accounting and assign them to the existing auto accounting function ‘Revenue and Invoice Accounts’.

To do this, first create rules for ‘Realized Loss and Realized Gain’ . This rule determines which company account segment the gains/loss should go.

Note: These accounts should be the same as the GL Gain and Loss account setup in Receivables.

Navigation: Projects -> Setup -> Auto accounting -> Rules.

In this example the company account segment to which Realized Gains will go is 0343, alternatively you can setup SQL as well to dynamically find the

Realized Gain account, but in general there will a single account, so generally constant type is used.

Now that we have created the Loss and Gain rules, we need to assign these rules to the ‘Revenue and Invoice’ Function.

For this we need to query this Function in the auto accounting setup and assign the already created rules to the Realized Gains account and

Realized Losses account.

Navigation : Projects-> Setup -> Auto accounting-> Assign Rules – > Query for ‘Revenue and Invoice Accounts’ and Find.

Then assign the rules as said above.

When funding revaluation process is run, the funding adjustment line.The revenue Loss/Gain events are created if there are any cash payments to the projects invoices in AR.

Comments

  1. Liz Hahn

    This is very helpful thank you. My current client doesn’t do the reevaluation yet but also has the FX issue with their expenses that are charged to a project. The difference between the multinational employees who work across countries and are paid for their travel and expenses as well as time.

    Net net they would like to be able to see the gross and net FX gain/loss on a project by project basis.
    Is there a way to do this without massive customization?

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