Get a Handle on Your Foreign Currency Impacts in Your Financial Reporting

Automate your foreign currency translation rules to eliminate foreign currency driven variables from your reporting

One of the things I’ve learned in my time spent implementing SAP Business Planning and Consolidation (BPC) across all sizes of companies in many different industries is that business requirements, especially as it relates to consolidated financial statements and reporting, are generally very much the same. One example is removing the impact of foreign currency fluctuations from an analytical perspective. Whether you’ve got one foreign entity or over a thousand, finance and accounting departments want the ability to measure their financial results, without impacts caused by changing FX rates muddying the water.  Are the results of an over-performing entity being hindered by a weak U.S. Dollar*?  Is an underperforming company looking better than they actually are because of a strong U.S. Dollar?  To answer these types of questions and measure a company’s true operational performance, you need to be able to split out FX driven variances in reporting.

In order to meet these foreign currency reporting requirements in their legacy environment, frequently companies maintain one of the following:

    1. a very complex, heavily manual, giant Excel workbook that addresses the reporting needs, but is most likely has some bad formulas in it, or;
    2. a very simple Excel file that only approximates the currency impact, at best.

SAP Business Planning and Consolidation (BPC) helps address the generation of data to meet these reporting requirements out-of-the-box using Foreign Currency Translation business rules that can be used to create as many categories (versions) of data that are required. Business users who own and maintain the system have the ability to update system parameters that will drive the rate at which the data is translated and then generate the results in a matter of minutes by executing jobs called Data Manager Packages.

Need to see Actual results at Budget rates? How about Forecast at Budget rates?  Or Actual current period at prior year same period rates?  Yes, BPC can handle those and more.

Some things to consider when setting up your BPC system to handle these requirements:

  • Do you need to see a full balance sheet or will an income statement be sufficient? Many times Balance Sheets have accounts that are set to translate at historical rates and/or are eliminated. In addition, does Retained Earnings need to roll from one period to the next? The system may need to be set up to copy data for these accounts to the FX Categories or certain other jobs may need to be executed within those FX Categories to carry forward retained earnings or post current year net income to current year retained earnings, in addition to executing the Foreign Currency Translation rules.
  • Do you want to see the full translated balance or do you want to only see the difference? For example, do you want to see the full Actual USD balance calculated at the Budget rate, or do you only want to see the USD difference between the Actual and Budget rates? The system can be set up to handle either or, but a decision needs to be made consistently across FX categories or you risk confusing reporting users.
  • How many FX Categories do you need? Sure, you may think you need to see current year Actual at last year’s Budget rates, but consider who may really use that for reporting and why? Many times we can over complicate reporting for users by simply giving them too much to choose from. Find the right balance between making their lives easier by generating the data for them and an overabundance of data.

There are many benefits from using BPC to handle the creation of the data to be used for FX impact reporting, including:

  • An automated solution is more consistently generating results that you can be sure to rely on.
  • Updates to rates are reflected in reporting at the push of a button, not going back through mountains of spreadsheets, saving your users valuable time.
  • Increased insight into entity level performance, especially for corporations only looking at FX impacts at higher levels of their reporting structures

So, how much longer are you going to keep spending hours and hours updating your FX workbooks when you could be using BPC to do the work for you? To learn more about BPC, download our Top 10 Considerations Guide for BPC 11.0 to get started on your journey!

 

*Could be any reporting currency, US Dollar was used as an example for a US-based company.

Similar posts

Cash planning using S/4HANA Finance
Read more
SAP Hybris Revenue Cloud
Read more
Time is running out to upgrade to SAP BusinessObjects Planning and Consolidation
Read more
Piecing together the SAP BPC Embedded Puzzle to allow end-users to create budgets and forecasts
Read more
Understanding financial and operational planning processes in SAP BPC Standard and BPC Embedded
Read more
Consider a BPC upgrade before mainstream support ends on Business Planning and Consolidation
Read more

Contact Us
Contact Us

Have questions? Please contact us.