Sitaram,
In CO we have “valuation” concept. This valuation concept have 3 views…Legal, Group, Profit Center View in CO Same time we do have different currency types. For e.g. Group currency, Company code currency.The combination of currency and valuation view ‑‑ for example, group currency and profit center view ‑‑ is referred to as a valuation approach. You need to assign the currency and valuation profile to a controlling area and then activate the profile. This ensures that the data is updated consistently in all the affected applications.
When you execute costing it usually uses exchange rate type P to calculates the cost.
let me know if you need more details.
Thank You
Hrusikesh