What is currency translation difference in SAP FI-LC - Consolidation?

SAP Term: currency translation difference

• Component: FI-LC

• Component Name: Consolidation

• Description: The difference resulting from currency translation because of any of the following reasons: A change in a currency's exchange rate over the course of time - for example, between two balance sheet report dates The use of different exchange rates, such as the historical and the current rates, during the translation of the individual assets, liabilities, revenue and expenditures These differences must be taken into account in the translated financial statements to ensure that the balance sheet balances. Currency translation differences can be posted with or without an affect on net income, depending on the differential items that are chosen.

Smart SAP Assistant

• Key Concepts: 
  Currency translation difference is a term used in the FI-LC Consolidation component of SAP. It is the difference between the amount of a foreign currency transaction that is reported in the functional currency of the company and the amount that is reported in the foreign currency. This difference is caused by exchange rate fluctuations between the two currencies. 
  
  How to use it: 
  In SAP, currency translation differences are calculated when a foreign currency transaction is posted. The system will automatically calculate the difference between the functional currency and foreign currency amounts and post it to a separate account. This account can then be used to track any changes in exchange rates over time. 
  
  Tips & Tricks: 
  It is important to keep track of currency translation differences as they can have an impact on the financial statements of a company. It is also important to ensure that all foreign currency transactions are posted in both currencies so that the system can accurately calculate any differences. 
  
  Related Information: 
  Currency translation differences are closely related to exchange rate gains and losses, which are also tracked in SAP. Exchange rate gains and losses occur when there is a change in the exchange rate between two currencies over time. These gains and losses can also have an impact on a company’s financial statements and should be monitored closely.