FX Contracts are linked automatically to each shipping invoice using the FIFO approach, whereby the oldest contract with available funds is assigned first and subsequent contracts added on a FIFO basis as more contracts are required to meet the size of the out standing Purchase Orders. The user is not permitted to select specific contracts. A warning message displays if the total shipping invoice amount is greater than the available FX contract amount of the division using the contract.
The FX contract and shipping invoice relationship is many to many. One FX contract can relate to more than one shipping invoice and an invoice can have more than one FX Contract. If an invoice has more than one contract, the weighted average exchange rate is used in costing the shipping invoice and receipts.
The weighted average cost methodology is:
Example: purchase of US$1,000,000
Contract 1: US$ 800,000 @ 0.56 = A$ 1,428,571
Contract 2: US$ 200,000 @ 0.52 = A$ 384,615 total A$ 1,813,186
Weighted Average is US$1,000,000/A$1,813,186 = 0.551515IE: US$ bought/total Aust$ Cost
The FX Contract exchange rate, or weighted average exchange rate if more than one contract is used, is used in converting the creditor’s trade amount to base amount.
The Creditors Inquiry panel includes, at the transaction level, the currency rates, and FX Contracts applicable to each transaction.
On payment of the invoice in the AP system, the amount paid is added to the utilised amount in the Contract record.
TMSDS/EXCD-DSC – Foreign currency exchange codes, has a field to indicate which exchange rates require FX contracts. This allows validation for mandatory entry of FX contracts for particular exchange rates whilst others are nominated as optional or no requirement.
The Stock Receipting function automatically utilised the exchange rate linked to each shipping invoice such that stock valuations reflect the same weighted average exchange rate.
View Setup requirements- Ensure nominated FX Divisions fit with reporting requirements which for example may be by range of Division in alpha sequence.
Control Files are:
TMSPU/FX-DIV – FX reporting divisions
Contracts are to be set up by Division by Bank by Currency using the following Control Files:
TMSGL/BNK-FX – Foreign Currency Banks
********/EXC-DSC – Foreign Currency exchange codes are used in the Setup of FX Contracts and purchasing/shipping process.
TMSPU/FX-EXVAR – Exchange Rate variations percentage
- Setup the rules in the Divisional Reporting Rules.
- Setup Foreign Currency Contracts by bank by currency by division.
- The process begins with the purchasing/shipping module in Distribution. When the shipping invoice is created, the process obtains the exchange rate from oldest contract and commits the amount of the invoice by division based on rules for division and currency.If the currency in EXC-DSC equals:
1=Reject invoices if no contract or full coverage not available
2=Cover is optional if cover available then obtain the exchange rate from contract else use the exchange rate in the Distribution database management.
Blank=No contracts obtain rate from DS database management and process as per current procedure.
- In the FX Forward Contract Maintenance program (PUM200), the committed amount can be viewed against the Division that matches the initial reporting setup. This committed amount is the value that has been committed to the Shipping invoices.
- In Accounts Payable Module, when creating a payment cycle, create the payment type as FXP=FX Contract Payment and the Document type equals F= FX PAYMENT. A report is available for all payments by contract.
- The Creditors Inquiry panel includes, at the transaction level, the currency rates, and FX Contracts applicable to each transaction.
- In the FX Forward Contract Maintenance program (PUM200), the Utilised amount can be viewed against the Division that matches the initial reporting setup. This utilised amount is the value that was paid to the Creditor, for the oldest Contract that still has an outstanding amount.
- A report PUR200A can be printed with the values of the Total Contract amount, committed, outstanding purchase orders and the balance of uncovered purchase orders.
