The following image illustrates the time line for an accounts payable transaction, and shows calculations applicable to unrealized foreign exchange gain for this transaction and the realized foreign exchange gain for this transaction:

In this example, 100 GBPs (Great Britain pounds) for an accounts receivable transaction is converted to 120 USDs (United States dollars) on January 10th, the initial transaction date. At the end of the period on January 31st, the 100 GBPs are worth 150 USDs. Consequently, the amount of functional currency for the initial transaction in accounts receivable is increased by 30 USDs. The offset to this increase is the account on the income statement for the unrealized foreign exchange gain.

When the transaction is settled on February 21st, the 100 GBPs are worth 170 USDs. Consequently, the previous entry for the unrealized foreign exchange gain is reversed because the amount for this entry is an estimate. Also, the amount of the functional currency for the initial transaction in accounts receivable is increased by 50 USDs. The offset to this increase is the account on the income statement for the realized foreign exchange gain.

1. From the GL Accounts page, click the link for the GL Account.
2. On the GL account detail page that is displayed, click Edit.
3. In the FX Type field, select a value.

   To learn more about FX types, see GL Accounts and Applicable Foreign Exchange for FX Types.

   Only one active GL account can have an FX Type field value of RFX (realized foreign exchange), and only one active GL account can have an FX Type field value of UFX (unrealized foreign exchange).

4. Click Save.
5. Repeat the preceding steps for each GL account to which you want to assign an FX type.

The following table shows the GL accounts for the FX types. It also shows the applicable foreign exchange for the FX types. The applicable foreign exchange includes realized foreign exchange (RFX), unrealized foreign exchange (UFX), or no foreign exchange (No FX).

GL Accounts and Applicable Foreign Exchange for FX Types

FX Type	GL Accounts	Applicable Foreign Exchange
Monetary Non-cash	Accounts for assets and liabilities that you can easily convert to cash (for example, short-term accounts receivable and short-term accounts payable).	RFX. Calculated when you settle the transactions. UFX. Calculated when you click the UFX Revaluation button.
Non-monetary	Accounts for assets and liabilities that you cannot easily convert to cash (for example, accounts for fixed assets, inventory, and some prepaid charges).	No FX.
RFX	Account for the realized foreign exchange gain or loss. No further foreign exchange calculations apply to this account because this account balance is the result of the foreign exchange calculations.	No FX.
UFX	Account for the unrealized foreign exchange gain or loss. No further foreign exchange calculations apply to this account because this account balance is the result of the foreign exchange calculations.	No FX.
P/L Non-monetary	Accounts for the income statement that are recognized in a transactional currency that is the same as the functional currency (for example, accounts for cost of goods sold, depreciation expense, and local tax expense).	No FX.
Historical	Accounts that are recognized in a transactional currency that is different from the functional currency and that are not revalued when foreign exchange rates change (for example, accounts for equity, intercompany investments, and variance). Accounting entry lines in these accounts clear for the same amounts that they are posted to the GL.	No FX.

The following processing occurs when unrealized foreign exchange is automatically revalued in Kenandy:

1. The debits and credits on the accounting entry lines in all periods (for each GL account with a value of Monetary Non-cash in the FX Type field) are compared to each other to determine if they match.

   The source documents relating to these accounting entry lines are used to determine matches.

2. The accounting entry lines in each GL account are assigned to one of the following categories:
   • Fully Cleared. The accounting entry lines fully match each other. These accounting entry lines are excluded from the revaluation.
   • Full FX Exposure. The accounting entry lines do not match to other accounting entry lines. These accounting entry lines are included in the revaluation. The transaction date for the accounting entry lines is used in the revaluation.
   • Partially Cleared. The accounting entry lines partially match each other. These accounting entry lines are included in the revaluation. The transaction date for the accounting entry line that is a credit is used in the revaluation. If multiple credits exist for a partial match, the credits have the same transaction date.
3. The exchange rate (between the transactional currency and the functional currency) that is in effect on the balance sheet date is used to revalue the functional currency of the accounting entry lines that are included in the revaluation.

   For example, if the exchange rate on the transaction date for an accounting entry line is an increased rate on the balance sheet date, then the functional currency of the accounting entry line is revalued to reflect the increase. The transactional currency is not revalued.

4. An increase or decrease in the functional currency for the accounting entry lines is booked to an accrual account because it reflects an estimate. The offset to this accrual account is booked to the unrealized gain or loss account for foreign exchange.

   This accrual and offset are automatically reversed on the first day of the next period.

You can run unrealized foreign exchange (UFX) on the balance sheet any time during a period if the period is open.

1. From the Periods page, click the link for the period.
2. On the Period detail page that is displayed, click FX Calculations.
3. Click UFX Revaluation to run UFX on the balance sheet for the period.

   The functional currency for accounting entry lines (in the GL accounts with a value of Monetary Non-cash in the FX Type field) is revalued to reflect the current exchange rate (between the transactional currency and the functional currency). The results of the revaluation are displayed.

   In the results, the GL Account field shows the GL account, company, and transactional currency for the for the revaluation, and the Revaluation rate field shows the current exchange rate for the revaluation.

4. To view details about the source documents that apply to the revaluation amount for a line in the results, click the text in the GL Account field for the line.

   You can click the link again to hide these details.

5. To view the journal entry to applies to the revaluation amount for a line in the results, click the link in the Journal Entry field for the line.

   The journal entry details are displayed in a new tab. Each journal entry line is associated with a source document, and the offset for the total amount of the journal entry lines for the source documents is posted to the GL account with a UFX value in the FX Type field. The amount of a journal entry line for a source document increases or decreases the original amount of the accounting entry line for the source document.

   As with all journal entries, you can click the Generate Accounting Entry custom link to create accounting entries for this journal entry that applies to the UFX revaluation.

   Because UFX for accounting entry lines is an estimate, it is automatically reversed when realized foreign exchange (RFX) is calculated at the time the transactions are settled. If multiple periods pass before RFX is calculated for an accounting entry line, then the previous UFX for the accounting entry line is automatically reversed before the current UFX for the accounting entry line is recognized.

What Comes Next

After you revalue unrealized foreign exchange for balance sheets during the period close process, you close the GL area for journal entries. To learn more, see Period Close.