Exchange Rate and Translation Ratio

This article describes the posting of invoices  in multiple currencies for the same entity. The system need customization and configuration of the conversion rate and translation ratio of currency in SAP .

Before that we need to understand about Exchange rate type. We can define exchange rate for each currency pair. The exchange rate can be differentiated through different exchange rate type.

The exchange rate type is defined in Customization under General Settings ->Currencies->Check Exchange rate types

The following exchange rate types exist

·         Buying Rate

·         Bank Selling Rate

·         Average Rate

·         Historical Exchange Rate

·         Key Date Exchange Rate

The system normally uses exchange rate type (M) average rate.

Further to this, we need to understand more about Translation Ratio. The translation ration between two currencies means how a currency can be related with each other.

SAP normally recommends 1:1 ration for each currency pair. However, in some cases, SAP has inherent round off difficulties. This generally happen when one of the currency is strong and stable and other is too weak owing to the inflationary trends and other factors prevailing in the country. 

Exchange Rates are used to maintain the relationship between two currencies and to translate an amount into other currency. It is defined at client level and therefore applies for all company codes.

Exchange rates are defined for following purposes

·         Posting and Clearing

·         Exchange Rate Differences

·         Foreign Currency Valuation

Define Translation ratios

IMG: SAP NetWeaver ->General Settings -> Currencies -> Define Translation Ratios for Currency Translation Transaction: OBBS Table: TCURF

To enable an entity, post invoices in multiple currency, after translation ratio, exchange rates need to be maintained It is very important to lock the table entries during exchange rate maintenance as per basic database design principles to avoid any data record access during update.

Exchange rates are used to find the value of a given currency with respect to other currency.      

Define Exchange rate

IMG: General Settings -> Currencies -> General Settings -> Currencies -> Enter Exchange Rate Transaction: OB08 Table: TCURR

After all these necessary configuration, we are able to receive or post invoices with Multiple currency