Budgeting in More Than One Currency

Use

Having multinational locations with different national currencies may mean that you need to use different currencies for budgeting. This can also be useful if your costs are incurred abroad by goods procurement in different currencies.

Features

Each budget line item is saved in the currency in which you entered it (budgeting currency). The system also saves the amount in the controlling area and object currencies if they differ from the budgeting currency.

The system calculates each exchange rate using the exchange rate type and the value date. These are contained in the associated budget profile for the total values, and in plan version 0 for the annual values.

Usually, the total and annual values for budgeting line items are translated independently of each other. However, if you set the Translation of Residual Value indicator in the associated budgeting profile, translation of the total value is executed using sophisticated logic.

    • First the residual value is calculated (the difference between the total value and the total of the annual values). The conversion method for the residual value is the same as for the total value.
    • The converted total value is calculated from the converted residual value plus the total of the converted annual values.

This sophisticated logic is particularly useful if the total value is always meant to display the total of the annual values, and is not dependent on currency translations.

In the budget profile or the plan version, if the exchange rate type or the value date is different, the total and annual values may also have different exchange rates, and thus differ from each other.

You define the permitted budgeting currency in each budget profile (per project definition or request type):

  • Controlling Area Currency
    This is the currency used in the controlling area. If you are using the controlling area currency for budgeting, you can use this currency only for entering budgeting items.
  • Object Currency
    This is the currency used for the object (such as, WBS element), and is specified in the master data for the object (such as, WBS element). If you specify the object currency for budgeting, you can only enter the budget items using their respective object currencies.
  • (Freely Definable) Transaction Currency
    On the initial screen of each budgeting function, you can specify the currency in which budgeting items are to be entered. You can use as many currencies as required for budgeting. If you do not specify a currency on the initial screen, the system uses either the object currency or controlling area currency as default, depending on whether or not you set the Object Currency as Default indicator in the budget profile.

If you use more than one currency for budgeting, it may be more difficult to analyze the values displayed in the budget.
For more information on the values displayed in budgeting, see:
Budget Value Display

If you use availability control, you also define in the budget profile whether the assigned funds are to be checked against the budget values in the controlling area currency (default), or in the object currency. You can only plan a check against the budget values for projects if the object currency (national currency) for each WBS element does not change during the project.

For more information, see Availability Control.

Irrespective of the currency in which budgeting is executed, the entered budget items are always translated and updated in the controlling area and object currencies. In the budgeting functions, you can always display the current budget in both the controlling area and object currency.

Either the controlling area currency or the object currency is used as the basis for the checks triggered in the Check function.

For more information on budget checks, see: Budget Checks

The system evaluates budget line items using the current exchange rate. If the exchange rate changes after the budget has been entered, this can cause significant differences between budget values that were entered in different currencies. In particular, when you reduce the budget, this may result in values that are difficult to analyze and that are in currencies other than the controlling area currency.

For more information on budgeting items, see Displaying Budgeting Items.

For more information on retrospective updates to budget values, see

The exchange rates specified for translations between the controlling area and object currencies are often provisional and then updated at a later date. If so, you can translate existing budgets using the updated rates. You can recalculate the values in the object currency from the values in the controlling area currency, and vice-versa.
It may be the case, that previously consistent budget values produce inconsistencies after the translation. However, you can get the system to correct these inconsistencies automatically.
You can find the programs for retrospective translation and for removing inconsistencies in the Easy Access Menu under Accounting® Project System ® Controlling ® Budgeting ® Tools and for orders under Accounting® Controlling ® Internal Orders ® Environment ® Tools.

Activities

The following scenarios provide recommendations for budgeting and availability control for projects. The following questions are taken into account:

  1. Is it a national or international enterprise?
  2. Are the projects national or international?
  3. Do the WBS elements only incur costs in the relevant national currency or also in foreign currencies?

(Note: As we are only looking at things with regard to currency, enterprises or projects that took part in European monetary union are treated as "national" enterprises or projects.)

Scenario 1

National enterprise, national projects, costs only in national currency.

Controlling area uses national currency.
Budgeting of WBS elements done in controlling area currency = national currency.
Availability control also executed in the controlling area currency = national currency.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = Controlling area currency,
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the controlling area currency = national currency.

Scenario 2

National enterprise, national projects, costs also in foreign currencies.

Controlling area uses national currency.
As costs can also be incurred in foreign currencies, it is also advisable to budget projects in foreign currencies.
Availability control executed in the controlling area currency = national currency.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = (Freely definable) transaction currency,
    Object Currency as Default indicator is set
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the controlling area currency = national currency.

Scenario 3

National enterprise, national projects, costs only in corresponding country currency.

Controlling area uses group currency.
WBS elements use relevant country currency as object currency. This is integrated in the project hierarchy.
Budgeting of WBS elements done in object currency = national currency.
Availability control executed in the object currency.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = Object currency
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the object currency = national currency.

Scenario 4

International enterprise, national projects, costs also in foreign currencies.

Controlling area uses group currency.
WBS elements use relevant country currency as object currency. This is integrated in the project hierarchy.
As costs can also be incurred in foreign currencies, it is also advisable to budget them in foreign currencies.
Availability control executed in the object currency = national currency.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = (Freely definable) transaction currency,
    Object Currency as Default indicator is set
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the object currency = national currency.

Scenario 5

International enterprise, international projects, costs only in corresponding country currency.

Controlling area uses group currency.
WBS elements use relevant country currency as object currency. This must not be integrated in the project hierarchy.
Budgeting of WBS elements done in object currency = national currency.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = Object currency
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the object currency = national currency.
As the object currency does not have to be integrated into the project, availability control can only be executed against the budget in the controlling area currency = group currency!

Scenario 6

International enterprise, international projects, costs also in foreign currencies.

Controlling area uses group currency.
WBS elements use relevant country currency as object currency. This must not be integrated in the project hierarchy.
As costs can also be incurred in foreign currencies, it is also advisable to budget them in foreign currencies.

Therefore, you choose the following settings in the budget profile:

  • Budgeting currency = (Freely definable) transaction currency,
    Object Currency as Default indicator is set
  • Set the Availability Control in Object Currency indicator.

System runs consistency checks for the budget based on the object currency = national currency.
As the object currency does not have to be integrated into the project, availability control can only be executed against the budget in the controlling area currency = group currency!

Recommendations

  • Keep the exchange rates as stable as possible. In particular, you should not change the exchange rates while entering the original budget.
  • Define special reports that account for the problems caused by different currencies.
    For more information, see:
    Report: Updating Budgets:
  • Use as few currencies as possible, as the system often displays total values in controlling area or object currencies only. You cannot compare budgets that have been entered in different currencies.

Activities for Internal Orders

For internal orders, you should use the same criteria as for projects when you select the budgeting currency and the currency for availability control checks. As internal orders cannot set up hierarchies, only scenarios 1-4 are possible.