Period-end closing in Brazil: foreign currency valuation with PTAX
Any company with foreign currency balances must revalue them at month end. In Brazil the rate is not your choice: it is the Central Bank’s PTAX. Here is why, how much the difference can be, and how to set it up in SAP.
Context
One of the mandatory closing steps
Period-end closing is the sequence of activities that closes a month or a year. Some are required by the business, some are technically required, and some are optional, depending on the processes in scope. Foreign currency valuation is mandatory whenever the company holds foreign currency balances at month end.
| Transaction | Where |
|---|---|
| F.05 | SAP ECC with the classic general ledger |
| FAGL_FC_VAL | SAP ECC with the new general ledger |
| FAGL_FCV | SAP S/4HANA, also as the Fiori app “Perform Foreign Currency Valuation” |
The full close, step by step: Period-end closing.
The Brazilian requirement
Revalue at PTAX, the Central Bank’s rate
Foreign currency must be revalued at month end with the PTAX rate published by the Central Bank of Brazil (BCB). Foreign groups often load Bloomberg or XE rates into SAP for every company code. They are close to PTAX, but not the same, and with large balances the gap shows up in the books and can lead to fines.
BCB · PTAX
5.0987
4 decimals · the legal reference
Bloomberg
5.0518
4 decimals
XE
5.11619
5 decimals
USD/BRL on the last day of January 2023. Not only the rate differs between sources: the number of decimals does too.
Valued at PTAX
R$ 509,870.00
what the Brazilian books must show
Valued at Bloomberg
R$ 505,180.00
gap: − R$ 4,690.00
Valued at XE
R$ 511,619.00
gap: + R$ 1,749.00
Valued at PTAX
R$ 5,098,700.00
what the Brazilian books must show
Valued at Bloomberg
R$ 5,051,800.00
gap: − R$ 46,900.00
Valued at XE
R$ 5,116,190.00
gap: + R$ 17,490.00
Valued at PTAX
R$ 50,987,000.00
what the Brazilian books must show
Valued at Bloomberg
R$ 50,518,000.00
gap: − R$ 469,000.00
Valued at XE
R$ 51,161,900.00
gap: + R$ 174,900.00
Valued at PTAX
R$ 254,935,000.00
what the Brazilian books must show
Valued at Bloomberg
R$ 252,590,000.00
gap: − R$ 2,345,000.00
Valued at XE
R$ 255,809,500.00
gap: + R$ 874,500.00
Same balance, same day, different source. Example with the January 2023 rates above.
Why the rates differ
Market rate vs PTAX
Foreign sources
Bloomberg, XE and similar services show the mid-market (commercial) rate in real time. The number depends on the minute you take it.
The BCB’s PTAX
An average of the rates the BCB collects from foreign exchange dealers at four moments of high liquidity in the interbank market. There is a buying and a selling PTAX.
PTAX follows the IOSCO principles for financial benchmarks (International Organization of Securities Commissions): governance, quality of the reference rate, quality of the method, and accountability.
In SAP
How the valuation runs
A common practice in Brazil is the buying PTAX for assets (receivables, cash) and the selling PTAX for liabilities (payables, loans). In the valuation method (OB59) you can set one exchange rate type for debit balances and another for credit balances. Confirm the rule with your tax team.
The BCB publishes PTAX on its website and through its open data services, so the rates can be loaded into SAP by a daily job instead of typed by hand. bcb.gov.br
If the group needs its own rates for consolidation, keep them in a separate exchange rate type or valuation area. The Brazilian company code’s local books still use PTAX.