Chapter 6. Purchasing 97 6.2.3 Exchange rates You use the Exchange Rates application to enter, view, and modify exchange rates for converting currencies. The exchange rate is the multiplier used to convert the currency in the Convert from Currency field to the currency in the Convert to Currency field. For example, an exchange rate of 1.7 from British pounds to U. S. dollars means that the value in British pounds is multiplied by 1.7 to calculate the value in U. S. dollars. When a user enters an amount in a foreign currency, for example on a purchase requisition, purchase order, or invoice, the application finds the active exchange rate for that currency to calculate the cost in the organization's base currency. If the application does not find the exchange rate between two currencies explicitly defined, it will use specific rules and logic to calculate the exchange rate from other exchange rates, if they exist. The application stores exchange rates at the organization level. Therefore, each organization defines and maintains its own exchange rates. The Exchange Rates application contains two table windows: Organizations window is used to select the organization for which you want to enter or modify exchange rates. Exchange Rates widow is used to enter and modify exchange rates for the selected organization for specific periods of time. Although you use Exchange Rates application to define exchange rates between currencies, you use the following applications to manage other aspects of currency administration: Currency Codes application is used to define the currency codes. Organizations application is used to specify the base currency for an organization. The application stores exchange rates at the organization level. Therefore, each organization defines and maintains its own exchange rates. Converting a foreign currency value to base currency When you specify a foreign currency on a purchase requisition ( PR) or purchase order ( PO), the system calculates two values: Total Cost, expressed in the foreign currency Total Base Cost, expressed in the base currency ( your company's currency)

98 Certification Study Guide Series: IBM Maximo Asset Management V7.1 Example: Conversion Your base currency is US$ ( U. S. dollar). You enter a PR for gaskets, to be ordered from a French company. On the PR tab, you select EUR ( euro) in the Currency field. On the PR Lines tab you enter the following values: Quantity: 25 Unit Cost: 3.14 ( in euro) Using the active exchange rate of 1.17726 for the EUR, the system calculates two values and displays them on the PR tab: Total Cost: ( 25 x 3.14 euro) = 78.50 ( in EUR) Total Base Cost: ( 78.50 euro x 1.17726 exchange rate) = 92.41 ( U. S. dollars) Tax options You use the Tax Options dialog box in the Organizations application to specify default tax GL accounts and to define tax codes for the system to use in calculating the amount of tax that is due on a PR, RFQ, PO, or invoice. You may define up to five tax types, each of which can have any number of tax codes. The system uses tax type and tax code as follows: A tax type corresponds to a kind of tax, for example, to a federal, state, or city sales tax. Another tax type might be a special tax for handling hazardous material. A tax code represents a particular tax rate, such as MA for the Massachusetts sales tax of 5%. Thus, one tax type might include tax codes for all state or provincial sales taxes. Tax Options are set at the Organization level. Some businesses require that taxes be reflected in the total price of some or all purchased goods and services. Adding this procurement cost to the item price increases a stocked item's average cost. If an item is issued directly to a work order, general ledger ( GL) account, location, or asset, taxes are added to the cost of the individual item. Loaded Cost field indicates the total cost of the item, including taxes and service costs. Note: Paid Tax GL Account field is for taxes paid to the vendor and is only used in the Invoice application. Unpaid Tax GL Account field is for taxes not yet paid to the government and is only used in the Invoice application.