Currency types in sap

Understanding currency types in SAP FI is critical for both users and consultants. If a user does not understand the currency types, then they will book entries wrong. If the consultant does not understand them, then serious valuation problems can result.

Consider the following:

We have a Mexico affiliate of a US corporation that is procuring supplies from Germany. The contract is denominated for 500 EUR, but the company reports tax locally in MXN, and operating results from all countries are consolidated into USD. 

What currency should the contract be tracked in? The answer, of course, is EUR, MXN, and USD. SAP gives us the flexibility to account in different currencies for different purposes.

What is document currency?

The document currency is the currency of the transaction which depends on the structure of the transaction. In our example, we're legally obligated to pay 500 EUR. Thus our document currency is EUR. This currency is actually set on the document at the time of the transaction. When we start FB60 to book our vendor invoice, we select the document currency of EUR.

What is local currency?

The local currency is the currency of the company code which represents the legal entity in a 'standard' SAP configuration. This currency is used to comply with local tax reporting requirements as well as representing the functional currency as seen in FAS 52 or IAS 21. In our example above, the functional currency for a Mexico entity is most likely MXN. That said, according to FAS 52 or IAS 21, if we suppose the primary business to be exporting to the USA, then the functional currency might be USD. In any case, the currency is set on the company code as you can see below configuration screen.¹

What is group currency?

To enable reporting across all entities in an SAP environment—for doing comparative metrics and quick estimations—you can use the group currency. Since our example entity is based out of the USA, then the USD would almost certainly be the group currency. The group currency is set at the client and is consistent across all company codes. You can see the configuration below.²

Tying it all together

In the configuration, you specify which currencies are relevant for which company codes. Notice that you can have up to three currencies for the company code in addition to the document currency. That allows for inflation accounting and other currency types that we haven't covered here. In this very standard setup, we have the first currency set as the company code currency (the local currency) and the second currency set as the group currency. That means, for any transaction, we'll have a document currency, the currency of the legal entity, and the currency of the entire enterprise.³

Now, when we post a document, we can see that each currency type is being calculated and tracked—even if we don't explicitly enter it!

For more support, contact our team of ERP consultants at erpsuites.com.

1 Defined when you create the company code in SPRO > Enterprise Structure > Definition > Financial Accounting > Edit, Copy, etc. Company Code
2 Basis can modify the client in SCC4
3  SPRO > Financial Accounting New > Financial Accounting Global Settings New > Ledgers > Ledger > Define Currencies of Leading Ledger

If currency types are configured for a company code: whenever a document is posted in the company code, balances will be updated in transaction currency as well as all the assigned currency types.

How to set up different currency types for a company code?

For document currency or transaction currency, no configuration is required. Other currency types (company code currency, group currency, hard currency & index based currency) needs to be configured in a company code.

In a ledger (leading or non-leading ledgers) maximum three currency types are allowed.

Leading ledger:

First local currency (LC1) is by default company code currency and cannot be changed.

Second local currency (LC2) is usually group currency (using LC2 is optional).

Third local currency (LC3) can be hard currency or index based currency (using LC3 is optional).

Non leading ledger:

First local currency (LC1) is by default first local currency of leading ledger or company code currency. (Cannot be changed)

Second local currency (LC2) is usually group currency. (Using LC2 is optional)

Third local currency (LC3) can be hard currency or index based currency. (Using LC3 is optional)

LC2 & LC3 currency of non-leading ledger must be one of the currencies which are used in leading ledger. Currencies other than which are used in leading ledger cannot be used in non-leading ledger.

Below picture shows configuration of currency types in a ledger (T code: OB22)

Currency type defines the purpose of a currency. The standard SAP S/4Hana system provides the various standard currency types for various purpose. The following are the important currency types in SAP S4 Hana

SAP S/4 Hana allows to use up to 10 parallel currency per ledger, so you can easily manage, check and monitor the balances and line item in different currency as per an organization requirements.

How to define currency types in SAP S/4 Hana

You can define currency types in SAP S/4Hana by using the following configuration steps

IMG Menu Path: SAP Customizing Implementation Guide  > Financial Accounting > Financial Accounting Global Settings > Ledgers > Ledger > Define Settings for Ledgers and Currency Types

Step 1: Execute transaction code “SPRO”

Step 2: Choose “SAP Reference IMG

Step 3: Follow the menu path and execute the IMG activity “Define settings for ledgers and currency types.

Step 4: On change view “currency types” overview screen, it displays the list of defined currency types in SAP S/4Hana. To define new currency type in SAP S4 Hana system, click on new entries button.

Step 5: On new entries of currency type creation screen, enter the following details

• Currency Type: Enter 2 digits key that defines the currency type in SAP Hana
• Description: Enter the description of currency type
• Short Description: Enter the short description of currency type
• Definition Level Settings: Choose the definition level for currency type settings as Global or company code specific.

Click the save button to save the defined currency types in SAP S4 Hana.

Currencies in SAP are used to express a transaction in monetary terms. SAP provides various options to manage currency type that you want to use while recording a transaction in to the Financial Accounting module.

Currency type used in a company code is called local currency in SAP and all other currencies are called foreign currencies. When SAP finds a document posted in foreign currencies it automatically translate it to local currency in SAP.

To get it translated from foreign currencies to local in SAP a translation ratio table and exchange rate table has been maintained in SAP. The currencies are defined in SAP for recording a transaction. Whenever you define a controlling area and company code, system will ask you to set your preferred currencies.

Below are type of currencies that are used in SAP FICO;

1. Company Code Currency
2. Group and Hard Currency

What is Company code currency in SAP

Used for external reporting requirements in a company.

What is Group Currency in SAP

Its used for consolidation purpose in SAP so that all the company code currencies value under that group can be reported in one.

What is Hard Currency in SAP

Its country specific and used for country specific requirements like reporting.

When you create a financial statement, you have to carry out foreign currency valuation process.

The selection of controlling area currency does not have any impact on SAP profitability analysis if you have selected it in CO-PA as independent of controlling area currencies. In Accounting based CO-PA data always updated in controlling area , company code and transaction currency where as in costing based CO-PA, you can update it in operating area and the company code currency.

Tables used in Currencies

TCURF, TCURR, BKPF-KURSF, TCURP

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Group currency is the currency that is set up for the client. This means that all company codes in the same client will have the same group currency.

It’s advisable to make the controlling area currency the same as the group currency to smooth the integration between the controlling (CO) and financial accounting (FI) functionalities. Even if you have the group currency enabled in FI and CO, this doesn’t necessarily mean that it’s automatically available in the Material Ledger. In this blog post, we’ll go over some configuration steps to demonstrate how group currency is set up in the Material Ledger for a specific company code. Then, we’ll walk through some key transactions you can use with group currency.

Setting Up Group Currency for a Company Code

First, let’s look at the currency of the company code EU10. To do this, go to Transaction OX02, and double-click Company Code EU10, as shown below.

As you can see, Company Code EU10 has a Currency of EUR. Now view the group currency that is set up for this company code by going to Transaction FINSC_LEDGER, selecting Ledger 0L, and double-clicking the Company Code Settings for the Ledger folder. You’ll arrive at the screen shown in the next figure.

Company Code EU10 has two currency types: company code currency (Local Curr. Type) 10 and group currency (Global Curr. Type) 30. You’ve already seen that the company code currency is EUR. Now you can see the group currency by double-clicking on the Currency Conversion Settings for Company folder shown above, which will take you to the screen shown below.

You can see that the group Currency Type 30 with Currency USD is enabled for Company Code EU10. This group currency is based on the Company Code Currency as a Source currency type, and the Exch. Rate Type M (Standard translation at average rate) is used to convert the company code currency to the group currency. This conversion between the company code currency EUR and the group currency (USD) is set up in the exchange rate tables in Transaction OB08, as shown here.

Here, the exchange rate between EUR and USD is 1 EUR to 1.25 USD.

Now take a look at the Material Ledger settings for any plants assigned to company code EU10 by going to Transaction OMX3 and looking at the Material Ledger type assigned to the plant in Company Code EU10 (see below).

The plant (Valuation area) 101O, which is assigned to Company Code EU10, is assigned to Mat. ledger type 9300.

To see the currency types that are assigned to this Material Ledger, go to Transaction OMX2, select Mat. Ledger Type 9300, and double-click the Define individual characteristics folder to view the data shown below.

You’ll see that Mat. Ledger Type 9300 has two currency types assigned to it: Company code currency (10) and Group currency (30). Assign this Material Ledger type 9300 to the plant (171O) in company code EU10 to enable the group currency in the Material Ledger for this company code.

To now see how the material master in this plant looks with the company code currency and group currency, go to Transaction MM03 and select the Accounting 1 view for material HAWA-123 in plant 101O (see the next figure).

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You can see that the material HAWA-123 has a Company code currency of 1.00 EUR. This is translated into the group currency (USD) using the exchange rate that we saw earlier of 1 EUR to 1.25 USD. Therefore, the Group currency for this material is 1.25 USD.

Note: Standard vs. Per Unit Price: You’ll notice that there are two price fields shown in the figure above: Standard Price and Per. unit price. Because the price control (Prc. Ctrl) of this material is V, the Per. Unit price is the valuation price, and the Standard Price is statistical.

You’ll also notice that the currency types shown in the material master don’t specify which valuation view is used. When this happens, it means that the currencies are at legal valuation. You can therefore say that the material has a valuation approach of company code currency/legal valuation and group currency/legal valuation. For convenience, we’ll only mention the currency type, as it’s assumed that the valuation view is legal, unless specified otherwise.

Changing Material Cost

Let’s now perform a few transactions for this material. The first transaction we’ll show is the changing of the cost of this material. Because the material is valued at moving average price (indicated by a price control of V), you can change the material price using Transaction MR21, as shown here.

You enter the new price in the New price column. In our example, the material price has been changed from 1.00 EUR to 1.20 EUR.

Note that there are two tabs in the screen, which are EUR Co.Code and USD Group. If you’ve used Transaction MR21 without the Material Ledger active, you may not be familiar with these two tabs in this screen. They appear because the price change will need to be done in both the company code currency (EUR) and the group currency (USD). You can do this in one of the following ways:

• Click the USD Group tab, and directly enter the equivalent USD amount in New Price field of that tab.
• Click the USD Group tab, highlight the line with the material, and click the Translate Selected Objects button (highlighted in the above figure). This will lead to the popup box shown below.

The system is proposing the translation from EUR Company code currency. It also gives the option of the type of price you want to change. The Valuation Price is the price the inventory is valued at (the moving average price, in the example), whereas the Statist. Price is the standard price. Click the Confirm Entry button to save your changes.

Now you can go back to the Accounting 1 view for this material and see what has changed, shown here.

The Company code currency price has changed to 1.20 EUR, while the Group currency price has changed to 1.50 USD, which is the USD translation of the EUR amount at the exchange rate shown earlier.

Making a Purchase

Now, you can make a purchase for this material to see how it affects the material master and relevant reports. For a purchase of 1,000 pieces at a price of 1.80 EUR, the purchase order is shown here.

After performing a goods receipt for the purchase order, the Company code currency and Group currency for material HAWA-123 will look like the figure below.

The material HAWA-123 now has a price of 1.80 EUR in Company code currency, which was translated into 2.25 USD in Group currency, and a Total Stock value of 1,000 PC. Let’s see what the posting looks like in the Universal Journal (table ACDOCA).

You can see that the company code and group currencies are shown in table ACDOCA for this material. In SAP ERP, these values will normally be viewed in the material valuation table MBEW, but in SAP S/4HANA, these values are shown in the Universal Journal. You’ll also be able to view the values in the SAP Fiori reports for inventory, such as the Material Inventory Values – Balance Summary report, shown in the final figure.

You can therefore see that for every inventory posting, you’ll be able to track both the company code and group currency on a material level. Without the Material Ledger, if you had group currency activated, you would have been able to see this information on a general ledger (G/L) basis and not a material basis as well.

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Editor’s note: This post has been adapted from a section of the book Material Ledger in SAP S/4HANA: Functionality and Configuration by Paul Ovigele.

Use

For each monetary amount that you enter in the SAP System, you must specify a currency. You enter currencies as the ISO standards, for example, USD for U.S. dollars.

You define currencies in Customizing. To do so, in Customizing choose .

In Financial Accounting, you have to specify for each of your company codes, in which currency ledgers should be managed. This currency is the national currency of the company code, that is, the local currency (or company code currency). From a company code view, all other currencies are then foreign currencies.

You should configure your controlling area currency as another local currency. We recommend setting currency type 30 for it.

You can manage ledgers in two parallel currencies in addition to the local currency, for example, group currency or hard currency. One of these should be your controlling area currency, if possible. Other currency combinations are possible if you migrated your system from an earlier Business Suite release. In such cases, you can manage two additional local currencies in Financial Accounting, if they are not the controlling area currency.

For more information about

In order for the system to translate amounts into various currencies, you must define exchange rates. For each currency pair, you can define different exchange rates and then differentiate between them by using exchange rate types.

Integration

In Financial Accounting, currencies and currency translation are relevant in connection with the following:

In this SAP FI tutorial, we will talk about currencies in SAP Financial Accounting. You will learn what is a currency in SAP FI and what are the configuration steps for defining a new currency in SAP system. We will mention the SAP transactions and tables that are relevant for this process.

What is a Currency in SAP

To record any financial transaction currency is needed. Each country has an individual currency. SAP standard system provides all the existing currencies as per ISO standard. SAP also provided flexibility to create new currency as per ISO standard. SAP issues a note to create new currency with respective configuration details.

Example:

SAP released note 791997 with the setup of currency RON in SAP.

How to Setup a Currency in SAP

1. Define a Currency

This step is necessary to create a new currency in SAP with text, ISO code and all other details.

Path: SPRO – SAP reference IMG – SAP Net Weaver – General settings – Currencies – Check currency codes

Transaction code: OY03

Table: TCURC (Currency Codes)

2. Set Decimal places for The Currency

This step is necessary to set decimal places for a currency. Decimal places configuration cannot be changed after transaction posted because it will lead to data inconsistency. In our example, for currency RON decimal places should not be maintained (according to the recommendations specified in the note 791997).

Path: SPRO – SAP reference IMG – SAP Net Weaver – General settings – Currencies – Set Decimal Places for Currencies

Transaction code: OY04

Table: TCURX (Decimal Places in Currencies)

3. Define Translation Ratios for Currency Conversion

This step is required to maintain currency conversion ratios to allow foreign currency transactions.

Example:

A company code is in the currency INR whereas I have to book an invoice in USD. To allow this transaction first the currency translation ratios for INR/USD and USD/INR to be maintained. Next, the system will allow to maintain exchange rate and finally a user will be able to book the invoice in USD.

Path: SPRO – SAP reference IMG – SAP Net Weaver – General settings – Currencies – Define Translation Ratios for Currency Translation

Transaction code: OBBS

Table: TCURF (Conversion Factors)

In the above screenshot ExRt refers to an exchange rate type, exchange rates are maintained against an exchange rate type hence transaction ratios are to be maintained at an exchange rate type. The exchange rate type M means the standard translation at the average rate provided by SAP. By default, the SAP system considers exchange rate from the exchange rate type M (if other exchange rate types are not maintained).

As per the client requirement it is also possible to create a new exchange rate type. Currency translation ratios are to be setup against the new exchange rate type for maintaining exchange rates.

Alt. ERT refers to an alternative exchange rate type. Instead of fetching from the exchange rate type M, the SAP system can fetch from the alternative exchange rate type for certain time period or certain currency combinations. Exchange rate is also fetched from the alternative exchange rate type.

4. Enter Exchange Rates

This step is necessary to maintain exchange rates for currencies against an exchange rate type. This activity needs to be performed at the client level on a daily basis.

Path: SPRO – SAP reference IMG – SAP Net Weaver – General settings – Currencies – Enter Exchange Rates

Transaction code: OB08

Table: TCURR (Exchange Rates)

In the above screenshot, the exchange rate is maintained between the currencies RON and BRL on a daily basis.

In the new G/L SAP accounting, a company code can have 3 currencies. The first one is the local currency (company code or functional currency). The second and the third currencies are maintained as per the reporting requirements. For example, a company code currency is INR, whereas the second currency is USD and the third currency is EUR, so if a document is posted in the local currency (INR), the system in background updates values in USD and EUR through the exchange rate maintained in this transaction.

It is not mandatory to maintain the additional two local currencies in the new G/L. They can be maintained if there is a requirement. It is necessary to configure the same currencies in Asset accounting as well.

Types of Currencies in SAP

In SAP, we have 5 different kinds of currencies as explained below.

Company code currency: The currency in which a company code is configured.

Group currency: The currency is assigned at the client level.

Hard currency: The currency which is assigned at the country level.

Index based currency: This currency is assigned to countries in case of high inflation in these countries.

Global company currency: The currency is assigned to a company or an internal trading partner.

The steps described above are the basic settings to define a new currency in SAP. In addition to the above, we also have other configuration settings available to define expiring currencies. For example, the currency ATS (Austrian Schilling) is expired due to the introduction of EUR currency.

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Did you like this tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP FI tutorials.

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