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

translation difference - Overview

• Component: FI-LC

• Component Name: Consolidation

• Description: The difference in reporting group currency that occurs when an amount in local currency is valued using different exchange rates between two periods.

translation difference - Details

• 
  Key Concepts: 
  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 asset or liability that is translated into the functional currency at the current exchange rate and the amount that was originally recorded in the foreign currency. 
  
  How to use it: 
  The translation difference is used to adjust the balance sheet of a company when it consolidates its financial statements. This adjustment is necessary because exchange rates can fluctuate over time, and this can cause discrepancies between the original amount recorded in the foreign currency and the amount that is translated into the functional currency. 
  
  Tips & Tricks: 
  When calculating translation differences, it is important to remember that any gains or losses due to exchange rate fluctuations should be recorded as a separate item on the balance sheet. This will help ensure that all financial statements are accurate and up-to-date. 
  
  Related Information: 
  Translation differences are closely related to other concepts such as foreign currency gains and losses, exchange rate fluctuations, and consolidation adjustments. It is important to understand how these concepts interact with each other in order to accurately record financial information.