Steps to Perform Revaluation in Fusion Application

Introduction

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.

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-

1.     Define Currencies

2.     Manage Daily Rates

3.     Define Period Close Components

a.     Manage Revaluations

b.    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 subledger and transferred to the Oracle Fusion General Ledger at the time when obligation is settled.

Currencies

Revaluation can be run for a single foreign currency or for all currencies. When we run revaluation, General Ledger creates a revaluation batch containing a separate journal entry for each revalued foreign currency.

General Ledger creates the revaluation adjustments in ledger currency. General Ledger will automatically define the reversal period for Revaluation Journals if the Category has been set to automatically reverse.

Average Balance Ledgers

When we revalue balances in an average balance ledger, General Ledger only revalues standard balances. When we post the revaluation journal entries to update standard balances, the system recalculates average balances automatically.

Revaluation Example -

At the end of the accounting period, the revaluation process creates an unposted journal to record the change in the converted balances to the Unrealized Gain/Loss Account. The journal is posted, and then reversed at the beginning of the next reporting period.

In this above example:

• The original journal entry in Euro remains the same.

• At period end, the exchange rate has changed to 1.2885

• The receivable is still 10,000 Euro, but is now $12,885 US Dollars.

• The offset of $100 is recorded in the Unrealized Gain account.

In order to perform revaluation, the following steps need to be followed:

In order to perform revaluation the user needs to follow the below steps:

Step-1 Navigate to Manage Revaluation using search option from Setup and Maintenance area-

Step-2 Enter Create Revaluation details. Enter required details. Also, provide details of Unrealized Gain and loss account information. 

Step-3 Enter Revaluation account details and Account filter conditions-

Save this information and “Generate Button” highlighted as shown below

Step-4 After clicking on Generate Button, enter parameters details and then click on Submit button.

A process ID is generated which confirm that your request is submitted successfully.

After submitting the program ensure that it completes with the status as normal

Step-5 Review the Request ID and Post unposted journal if Post Automatically is not selected.

Note the date and rate at which revaluation journal is created. The journal entry is created in functional currency (Currency of Ledger selected in Revaluation)

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