When you create a foreign currency receipt or transaction, Receivables requires you to enter an exchange rate. Receivables uses this rate to convert the amount to your functional currency and create accounting entries in both currencies.
When you create a transaction with several line items, the total amount in the two currencies may vary slightly (usually by the minimum accountable unit defined for your functional currency). These differences occur due to rounding, the mathematical process of approximating an amount to a specific number of decimal places. Rounding differences can occur whenever you use an exchange rate to convert transaction amounts to a different currency.
Depending on legal requirements established in your home country, you may need to round amounts at the transaction header level and then account for and post the rounding difference in a separate account. You can do this in Oracle Receivables by enabling Header Level Rounding and defining a Header Rounding Account in the System Options window. If you do not enable Header Level Rounding, Receivables rounds amounts at the line level and posts any rounding difference to the Receivables account.
Note: If you enable Header Level Rounding, then Receivables displays a rounding distribution line for all transactions, regardless of currency. If the transaction is in your functional currency, then the amount of this line is zero.
In this example, Header Level Rounding is set to Yes and a Header Rounding Account is defined.
You have an invoice in Euro, which consists of three line items. To convert the invoice to the US Dollar, you specify an exchange rate of 1.385999.
The following table shows the calculations Receivables performs to convert each amount when you save the invoice.
| Item Description | Amount in Euro (EUR) | Exchange Rate | Amount in US Dollar (USD) | Comment |
|---|---|---|---|---|
| Paper | 15.00 | 1.385999 | 10.82 | rounded down |
| Pens | 12.00 | 1.385999 | 8.66 | rounded up |
| Envelopes | 25.00 | 1.385999 | 18.04 | rounded up |
| Subtotal: | 52.00 | 37.52 | sum of items | |
| Rounding Difference | - 0.01 | |||
| Total Amount: | 52.00 | 37.51 | rounded down |
In this example, Receivables first converts each line item and then adds them to give a total of 37.52 USD. The 0.01 is the rounding difference, which Receivables records in the Header Rounding Account that you define.
If Header Level Rounding is not enabled, Receivables converts amounts by first adding the line amounts in the invoice currency and then dividing by the exchange rate. Using the amounts in this example, the result is: 52/1.385999 = 37.51
To enable Header Level Rounding, check the Header Level Rounding check box and define a Rounding Account in the System Options window. For more information, see: Accounting System Options.
Warning: After you enable Header Level Rounding and save your work, you cannot disable the feature.