When your customer remits payment for an invoice, debit memo, or chargeback, the receipt is usually in the same currency as the transaction. However, there may be times when your customer remits payment in a currency that is different than the currency of the open debit item. For these occasions, Receivables lets you create cross currency receipt applications to let you fully or partially process the payment.
For example, you create Invoice 101 in Canadian dollars (CAD) but your customer sends a receipt in Deutsche marks (DEM) as payment. Using the remittance information provided by your customer, you can either fully or partially apply this receipt to Invoice 101. Receivables automatically calculates the open balance on the invoice (if any) and the foreign exchange gain or loss (FXGL) for this application. You can apply receipts to transactions using any currency defined in Oracle General Ledger.
Because of fluctuating exchange rates between currencies, cross currency applications must be evaluated to determine their effect within Receivables and the corresponding accounting entries created in your general ledger. With each cross currency application, you can incur either a foreign exchange gain or loss (FXGL).
When you apply a receipt to a transaction that is in a different currency, Receivables first determines the transaction and the receipt amounts in your functional currency. Receivables then compares these amounts to determine the foreign exchange gain or loss for this application. If the result is positive, you will incur a foreign currency exchange gain for this application; if the result is negative, you will incur a foreign exchange loss.
Note: As with same currency receipt applications, Receivables accounts for your FXGL using the Realized Gains and Realized Losses accounts that you defined in the System Options window.
Viewing Discounts on a Cross Currency Receipt Application
When you apply a receipt to multiple transactions that are in different currencies, Receivables does not display the total discount amount in the Receipts window (Application Summary tabbed region). This is because Receivables always calculates discounts in the currency of the transaction. Since there are multiple transactions with multiple currencies involved in this type of application, the total discount cannot be expressed in a single currency. Therefore, you can only view the discount for each application separately in the Applications window.
To do this, perform the following:
- query the receipt in the Receipts window
- choose the Applications button
- scroll to display the Discounts field (if this field does not appear in the window, choose Show Field, then Discounts from the Folder menu)
Accounting Entries in Multiple Currencies
When you enter a receipt or a transaction that is not in your functional currency, Receivables requires that you enter the applicable exchange rate in the Exchange Rates pop up window. This lets Receivables account for amounts in both your functional currency and the currency of the transaction.
Customer Remittance Information
When applying cross currency receipts, your customer needs to provide you with the following remittance information:
- to which invoice(s) this receipt should be applied
- if the receipt is a partial payment, how much of each invoice is to be settled (this is the ’Amount Applied’ field in the Applications window)
- how much of the receipt should be allocated to this transaction (this is the ’Allocated Receipt Amount’ field in the Applications window)
Note: Alternatively, your customer can provide the exchange rate used to convert the transaction currency to the receipt
currency (this could be a previously agreed upon rate). If your customer provides this exchange rate, Receivables automatically calculates the Allocated Receipt Amount. For information on how the cross currency rate field and the Allocated Receipt Amount are mutually exclusive.