Introduction/ Issue
Revaluation is a process of adjusting the accounted value of foreign currency denominated balances according to current conversion rates. Revaluation adjustments represent the difference in the value of the balance due to changes in conversion rates between the date of the original journal entry and the revaluation date. These adjustments are posted through journal entries to the underlying account with the offset posted to an unrealized gain or loss account.
All debit adjustments are offset against the unrealized gain account and all credit adjustments are offset against the unrealized loss account. If the same account is specified in the Unrealized Gain Account and Unrealized Loss Account fields, the net of the adjustments is derived and posted.
Why we need Revaluation:
The purposes of Revaluation is to “true-up” liability or asset accounts that may be materially understated or overstated at month-end using an exchange rate at month- end. Revaluation is only necessary while the obligation remains unsettled (example the invoice is still unpaid or the receivable uncollected). The Realized Gain/Loss will be recorded at the time the obligation is settled.
Revaluation is typically done for reporting purposes only; therefore, the journal entries produced as a result should be reversed at the beginning of the next period. Revaluation is used to revalue all these transaction at the same rate the foreign subsidiary used to translate their intercompany balance. Prerequisites for Revaluation process is to define first unrealized gain/loss account and to define a period end rate type along with creation of period end rate for each currency.
How do we solve: –Setup steps for Revaluation in Fusion Application-
Navigate to the Manage Daily Rates task under Define Currencies and the Manage Revaluations and Manage Historical Rates tasks under Define Period Close Components to perform your revaluation and translation configuration.
Below are the common Applications Configuration we need to complete-
- Define Currencies
- Manage Daily Rates
- Define Period Close Components
- Manage Revaluations
- Manage Historical Rates
Revaluation and Translation are used to support multicurrency financial accounting requirements.
Both Revalue Balances and Translate Balances are run from the Period Close work area’s task panel.
When to run Revaluation
Revaluation is run at the end of each accounting period as part of the close process to revalue balance sheet accounts that are denominated in a foreign currency. The journal is then reversed at the beginning of the next period and this process is repeated until the transactions are settled.
The Realized Gain/Loss is recorded in the appropriate sub ledger and transferred to the Oracle Fusion General Ledger at the time when obligation is settled.
