AX 2012 appears to not support FAS 52

This question is not answered

We’re working with a live AX 2012 customer that is in the process of closing their first quarter on the system.  However, we’ve run into a troubling problem with the consolidations process; in particular with balance sheet accounts in foreign currency balances.

 

It appears that AX 2012 does not follow FAS 52 in that it does not translate balance sheet account balances at the spot rate as of the balance sheet date (month end rate but really any date where a client might wish to run the consolidation), but it translates only transactions, where they exist.  If a balance sheet account does not have any transactions for the consolidation period, the system does not translate that account balance at all. Running the revaluation process in the consolidated entity after the consolidation process does correctly compute a value to adjust account balances with no transactions at the end of the period, but this entry is reversed the next time a revaluation is run (the system treats these adjustments as unrealized gains and losses). 

 

Please say it’s NOT so!

All Replies
  • Hi Ron,
    Thanks for your question. 

    Microsoft Dynamics AX 4.0 has been assessed by an independent third party auditor to allow data processing for the purpose of financial reporting in accordance with IFRS, US-GAAP and the Sarbanes-Oxley Act requirements applicable as of November 30th, 2006. The report is available on our IFRS site on Partner/CustomerSource at the following link: IFRS and AX

    Additionally on this site you can obtain a write-up for IAS 21, which closely corresponds to FAS 52.  

    Microsoft Dynamics AX 2012 includes the following product enhancements in this area:

    • Currency exchange rates can be shared across companies
    • Currency exchange rate types can be defined, allowing for different exchange rates to be captured and used during revaluation, budgeting, and consolidation processes
    • In the consolidations process, the exchange rate type can be selected for a range of accounts by legal entity allowing for multiple rates to be applied
    • Main accounts in source companies can be mapped to one or more consolidation groups allowing for the main account to be mapped to different consolidation accounts.  A single consolidation group can be applied during the consolidation process and the mapping applied during the process.

    Please refer to the following support blog for a step by step walk thru of currency revaluation in consolidation company:

    http://blogs.msdn.com/b/axsupport/archive/2012/10/15/how-to-perform-currency-revaluation-in-consolidation-company-to-satisfy-reporting-requirements.aspx

     

    Heidi Minzner
    Program Manager - Microsoft Dynamics AX

     

  • Heidi,

    I am not sure you competely understand what Ron is saying here. We agree 100% with him here in Australia - The currency translation process is what is in question here, not the currency revaluation. Ron points out that the revaluation provides a work around but it is far from ideal as the fundamental accounting principles behind currency translation are not working - unless there is a setting somewhere we cannot see.

    An example of the issuess is : When performing a consolidation of NZD entities into an AUD Parent coy the balance sheet accounts need to translate at the spot exchange rate (one that users will set up and enter on the last day of the month).  The issue is that AX only translates the movement in an account, not the balance of an account – this generates the wrong result for the consolidated balance sheet.

    Example NZD BS account being translated in AUD:

    May Transaction NZD 1,000 @ 0.75 = AUD 750

    Jun  Transaction    NZD  100 @ 0.80 = AUD   80

    • Consolidated Balance should translate the account balance of NZD 1,100 @ 0.80 (the most recent spot rate) = AUD 880.

    • What AX  actually does is AUD 830 (750+80) which is wrong.

    I am very interested to know if other users have modified AX or have other solutions to solve this.

  • Hello,

    on the consolidation form, there is a tab "Currency translation", which is used for this purpose. In 2009, if I remember corrently, you specified on the ledger account whether you wanted to do the translation with the exchange rate on the date of consolidation or on the transaction date. This was enhanced in 2012 and moved to the actual consolidation form. On the above mentioned tab, you specify the rules for account ranges (e.g. all balance sheet accounts/all P&L accounts) and using the settings under the grid specify a) which exchange rate type you want to use, b) which date you want to use or c) the fixed exchange rate to use. The issue you are having is basically solved by setting the date to date of consolidation, not the transaction date. In my country, we usually set this up to translate currencies on BS accounts per closing date and PL accounts per transaction date.

    Regards,

    Bostjan

  • Bostjan,

    I definitely have the currency translation tab set up as "Consolidation Date" for Balance Sheet. The issue isn't which rate it uses, that works fine. The issue is that it will only apply the spot rate to the movement in the month instead of the entire balance. See the example below where the spot for May was 0.75 and for June 0.80.

    May Transaction NZD 1,000 @ 0.75 = AUD 750

    Jun  Transaction    NZD  100 @ 0.80 = AUD   80

    • Consolidated Balance should translate the account balance of NZD 1,100 @ 0.80 (the most recent spot rate) = AUD 880.

    • What AX  actually does is AUD 830 (750+80) which is wrong.

  • I am disappointed that no one has addressed this issue. Eric is exactly right:  people confuse currency conversion and currency translation, the former dealing with foreign currency transactions within a general ledger, the latter dealing with the combination of transactions and balances between ledgers that use different currencies. Currency translation should apply to period transactions in the income statement and the entire ending balance of balance sheet accounts and I don't see a way that AX2012 does this.

  • On my CU6 installation, I see several options that I haven't seen before on the Main Account form in the Management Reporter fast tab dealing with currency translation. They are Exchange Rate Type and Translation Type (Weighted Average, Average, Current, Transaction Type). Maybe this should be investigated?

  • Ron, could you please confirm if your questions has been answered and there is a resolution for this issue. the reason I'm asking is that we are implementing AX in our company and we would like to start using AX for consolidating companies with various different currencies into one consolidated company in USD and I want to make sure this function works properly in AX2012 R2.

    my contact email is fbayegan@comscore.com if you could kindly email me with tips on this subject.

    Regards,

    Farokh Bayegan

  • With Management Reporter CU7, currency translation to reporting currencies can be handled with Management Reporter.  more info here:   blogs.msdn.com/.../management-reporter-cu7-released-for-download.aspx

  • CGUST, We already have BI360 and are happy with performing translations and consolidations in the BI360 DW, my main concern is doing consolidations within AX and the issues that was originally reported in this thread.

  • Right, Heidi did not address the main issue that Eric more clearly identified above.  MS support assisted us with two things to get "towards" compliance.  First, we were on RTM + CU2 at the time so we needed no less than 5 hotfixes to get the consolidation and/or revaluation functionality working as designed.  Second, they helped us craft a manual process to do the consolidation in AX and I can send the process out to those who request it with their email address.  However, be advised that it's highly tedious and not likely to result in good customer satisfaction.  Note that we were ahead of the MR curve as well so this wasn't available to us at the time. We haven't revisited the issue with the latest R2 CU6 & MR CU7 environment to see if we're in better shape now as suggested by GOLOB & CGUST above.   I would suggest this be the next step.

  • Thank Ron for the quick reply. Please send me the process to fbayegan@comscore.com. I wish there was a way to figure out if consolidations in a Multi-currency environment in  AX2012 R2 is seamless and works according to FAS52 - assuming all hotfixes are applied. I really don't want to invest time and money in setting up AX consolidations to figure out there are unresolved issues - I'm just thinking loud.

  • I just want to reiterate that doing consolidations and currency translation in Management Reporter will be much more streamlined. There is no additional cost for Management Reporter and most the setup is shared with Dynamics AX.  In addition, there are now default reports to make it even faster to start using it.

  • Hi Ron,

    Can you send the material to vamsi.pranith@ignify.com please? We have a similar requirement and wish to use this as a solution. Thanks in advance!

    Regards,

    Vamsi.