What exactly are currency effects?
Currency effects arise with comparisons from previous periods through exchange rate variations.
The following are differentiated:
- The effect through the conversion of suppliers to the local currency – the transaction effect – and
- Through the conversion from the local currency to the reporting currency or currencies – the translation effect.
They are calculated by converting the current value with the average rate of the comparison period and forming the difference. Thus, the question is answered as to how the currency would have been if the exchange would not have changed.
If we subsequently further calculate with the exchange rate-corrected figure, e.g. to account for the price, quantity, and structural effects, we obtain values adjusted by the fluctuations of the exchange rate. Both currency effects should always be disclosed to fully represent the dependency, which is not within the competency, e.g. of procurement. A price decrease in supplier currency can rapidly lead to an increase of reporting currency through rate variations.
Spend Control 2022
Spend Control is a complete Procurement Controlling and Spend Management solution. It provides all functions, KPIs and measures needed for professional Spend Analysis.
With its standardized ERP interfaces you can connect the spend cube of Spend Control within a short time frame to any ERP system (e.g. SAP, Navision, Oracle etc.).
Here you will find important terms related to spend management explained in a clear way. Small knowledge base for quick information or in full for your further education. This controlling glossary is constantly being expanded and improved.
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