Currency clause handling is activated for items that are purchased from a supplier in a currency other than the currency in which it is sold to a customer, and is used primarily to determine if the sales price of the item should be impacted by exchange rate fluctuations.
By applying a currency clause to an item, you are determining if your customer will bear the entire gain/loss in the exchange rate difference or will only assume a part of it. If the difference in the exchange rate deviates beyond a predetermined fluctuation point the sales price will be recalculated. Note: This will only impact the sales price of items that have the Currency clause field set as YES in the Item file, Inventory information panel. The new sales price is calculated by the currency clause handling routine.
When entering a quotation/sales order line, the applicable currency clause code will be retrieved if the following is true:
- For items that are subject to currency clause handling the Currency clause parameter must be set to YES in the Item file, Inventory information panel.
- For customers that are purchasing currency clause-handled items, the Currency clause parameter must be set to YES in their Business partner file, Customer file.
- the Primary currency of the main supplier (as defined in the Business partner file, A/P Basic Data panel) is the same as the Purchase currency defined in the Currency clause code table.
- the type of currency used in the sales quotation/order must be identical to the Sales order currency defined in the Currency clause code table.
- the From date must still be valid, i.e. it must not have reached the Expired date. Each of these fields are also defined in the Currency clause code table.
The actual currency clause calculation takes place during invoicing:
- The system first verifies if the item being sold and if the customer it is being sold to is under the currency clause handling.
- If either of the above is true, the system then compares the currency exchange rate entered in the Agreed rate field (defined in the Currency clause table) with the current exchange rate (defined in the Exchange rate table), and the difference (if any) is calculated. The sales price will be adjusted according to the limit (Fluctuation %) agreed upon in the Currency clause code table.
- If the difference is outside of the agreed Fluctuation % value the system determines by how much and a new price is calculated. The new price is compared to the original sales price, it could be either +/-.
- The system adjusts the new price according to the value defined in the Exposure % field to calculate the final amount (if any) to be paid/debited to the customer.
To set up the system to handle exchange rate fluctuations do the following:
| Task | Table/File | To do |
|---|---|---|
| 1. Activate Currency clause handling in Distribution | Function control file | Activate the CURRCLAU function.
CURRCRTV (Auto currency clause retrieve): If this function is activated, the system will retrieve the default currency clause as described in the introduction of this document. If this function is inactivated, no automatic retrieval will be performed. Instead the user will need to enter the currency clause manually. |
| 2. Define the adjustment rules | Currency clause code table | When a sales order line/quotation line is created, the system will search for an entry in this table that has the same sales currency as the order and with the same purchase currency as defined for the main supplier of the item.
Define the following:
|
| 3. Define the items that are valid for currency clause handling | Item file
Inventory information panel |
Set the Currency clause field to True for all items that are valid for currency clause handling. |
| 4. Define the customers that are valid for currency clause handling and indicate if you want this information printed on the order confirmation and the invoice. | Business partner file
Customer file panel |
Set the Currency clause field to True for all customers that are valid for currency clause handling (i.e. purchasing currency clause-handled items).
Set the Print curr clause field to True if you want the currency clause information to be printed on the order confirmation and the invoice. |
| 5. Define any exceptions for the customer. | Business partner file
Customer clause exceptions panel |
Here you can define exceptions from the definitions made in the Currency clause code table. One exception can be that a customer should not use a currency clause when a particular item is sold. |
The currency clause code is defaulted to the following but can be changed:
- Quotation header: holds the currency clause code and print settings retrieved from the Customer file.
- Sales order header: holds the currency clause code and print settings retrieved from the Customer file.
- Sales order line level: holds the currency clause code and variant retrieved from the Customer file.
- Invoice header: holds the currency clause code and print settings retrieved from the Customer file.