Foreign currency

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Hi,

I have a problem with the Standard AX foreign currency features when making a vendor payment under the following scenario:

1) Record a vendor invoice for 1000 USD (769,23 EUR)

2) Revaluate the vendor invoice at the end of the month 1000 USD (800 EUR)

3) Pay the vendor invoice some days later 1000 USD (833,33 EUR)

4) Reconcile bank statements 1000 USD (719,42 EUR)

The company currency is EUR.

The problem I have is that Dynamics AX is calculating and posting a realized foreign currency loss of 64,10 EUR when I post the vendor payment journal

(Difference No. 3 and No. 1)

The actual / true exchange rate profit is however 49,81 EUR

(Difference No. 4 and No. 1).

The question is how to "tell" AX to generate the correct exchange rate gain/loss once I post the bank statement?

Any hint would be highly appreciated.

Many thanks and best regards,

Ludwig

All Replies
  • May be you can solve this when you will run the monthly closing for your General Ledger.

    Please review following link for more details

    technet.microsoft.com/.../aa571542.aspx

    Please verify


    Please update with your feedback.

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    Regards, NITESH RANAJN (PMP) | Dynamics AX Consultant

  • HI Ludwig,

    Standard AX only caters for tracking exchange rate differences per vendor transacion at moment of payment posting. You could wait for posting until the bank statement is received, but this is in most cases not desired or possible.

    I suppose when posting the vendor payment, a bridging account is used. Then the differences are visible on this account and should be cleared periodically.

    kind regards,

    André Arnaud de Calavon  |  Microsoft Dynamics AX Solution architect  |  My blog  |  My company

    This post is my own opinion and does not necessarily reflect the opinion or view of my company, Microsoft, both its employees, or other MVPs.

  • I am not sure that your expectations with regard to the GL posting results are correct.

    But first, in order to fully understand your issue, can you clarify -

    1. is the bank account you are reconciling is a bank account denominated in EUR or in USD?

    2. How did you reconcile the bank account? Was that through the regular  "bank reconciliation'?

    Zvika Rimalt * Dynamics AX Business Analyst/Functional Consultant * Vancouver, BC, Canada

  • Yes, this is one way how to take care of the issue but not really desired because you cannot clearly identify where the exchange rate profit / loss comes from and what the overall profit / loss is. Thanks for your feedback. Ludwig

  • Hello Andre,

    what you describe is exactly the problem.

    I'm not sure whether MS understands the issue and will ever change it...

    because the way of accounting for foreign exchange profits / losses is not quite right acc. to GAAP.

    Might need the help /support of a MVP to convince MS ;)

    Ludwig

  • Hello Zvika,

    Thanks for your feedback.

    1) The bank account is a Eur bank account on which all transactions in all currencies are posted.

    2) The reconciliation is done automatically via a bank statement import and modified matching procedure.

    Ludwig

  • Hi Ludwig,

    I want to make the argument that your expectation is actually incorrect, from an accounting point of view.

    I actually think AX does the "right" thing

    The 719,42 EUR on your bank account is the price your bank charges you for buying from them USD$1000

    This should not affect your recorded Fx gains/losses

    Why?

    I will try to make my point by using an extreme example.

    Let's say that you have a terrible bank: your bank is very expensive, gives you terrible exchange rates, and charges huge fees, Let's say that for this payment of $1000, the bank actually debit your account by EUR2000... outrageous, but as I said - they are a terrible bank.

    Would it be justified to record in your books the difference between EUR 2000 and 769,23 EUR as an Fx gain loss? I would argue not.  The difference between the 2 amounts is mostly due bank fees expenses and should be recorded as such.

    Hence - the difference between the EUR amount the bank change, and the EUR "real" value of $1000 at the date of payment should be recorded as bank charges expense

    On the other hand, the difference between the EUR value of $1000 at the time of payment and the EUR value of $1000 at the time of invoicing should be recorded as Fx gain/loss expense

    This is exactly what AX does.

    Zvika Rimalt * Dynamics AX Business Analyst/Functional Consultant * Vancouver, BC, Canada

  • Hi Zvika,

    I can follow your argument but the German government requires recording only one single Fx adjustment.

    That's my problem :-(

    Ludwig

  • If you can get the Bank amount in advance when sending the foreign remittance to bank. you can actually use the forced exchange rate on Journal lines to match FRx gain/ loss.

    ---------------------------------------------

    Thanks,

    Sachin