Currency Translation as per US GAAP Temporal Method

(0) Share

Report

Posted on by Community Member

Hello All,

We are a multinational company currently on AX 2012 R3 CU8. We have international companies which have their local currency as their accounting/functional currency. We follow US GAAP and the requirement is that we do the currency translation of our international companies in USD as per the below Temporal Method exchange rate.

6644.Capture.PNG

The challenge we are facing is around Inventory and Fixed assets and its related expenses such as depreciation. As per US GAAP temporal method for fixed assets, we have to use asset acquisition date exchange rate even for depreciation and other transactions associated with that fixed asset. I understand that AX provides consolidate online and MR reporter for currency translation that I can use with "Transaction Date" as my exchange rate date, but this doesn't solve depreciation and retirement transactions because transaction date on those transactions is different than acquisition date exchange rate.

And I am lost on inventory because we use FIFO and I just don't know how to get historical (transaction date) rate for inventory cost becuase of the complexity of the FIFO layers.

I am sure we are not the only AX customer that ran into this challenge, so I am counting on my fellow customers and AX experts to show us the path forward.

Thanks,

Vaseem Syed

*This post is locked for comments

I have the same question (0)

All responses (13)

Answers (1)

Suggested answer

Ludwig Reinhard Microsoft Employee on at

Like (0)

Report

Hi Vaseem,

Do your international companies use the same depreciation rules for their fixed assets as your Corporate Headquarter?

What I am referring to is the derived value model feature available in the fixed asset module.

If you make use of that feature you can generate additional transactions on separate ledger accounts that can be setup with a different Exchange rate type and currency translation type in your COA.

Even if your subsidiaries follow the same accounting and depreciation principles you can use this "trick" to setup different exchange rate conversion rules.

When it comes to creating your financial statement you just need to replace the accounts that are setup for your ordinary fixed asset model by the ones used in your derived value model.

Something similar can be applied for your inventory. By using ledger allocation rules in GL that do some additional postings on statistical accounts that you use for your "Special" currency translation this can be achieved basically the same way as for the fixed assets.

Hope I expressed this in a way that you can easily understand. If not, then it would be great if you could provide some sample data that we can use for going through those processes.

Best regards,

Ludwig

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Hello Ludwig,

Thanks for the quick and detailed response. We have the same depreciation method for Corporate & foreign companies, so the schedule itself is not the problem. I am not sure how we can use derived value model and GL allocation to track the asset acquisition exchange rate for depreciation and other transactions. I guess it has to be a very manual process which is how our foreign companies are maintaining now in an excel.

I was hoping there is some automatic way of achieving this maybe via posting layers or something because this is a common requirement for international companies who needs to report in US GAAP.

Thanks,

Vaseem

Was this reply helpful? Yes No
Verified answer

April Olson on at

Like (1)

Report

Hello,

I also want to add that AX did add acquisition date and if you do use Management Reporter for currency translation reporting, it will look at the acquisition date to get the proper exchange rate.

https://blogs.msdn.microsoft.com/dynamics_financial_reporting/2014/01/23/acquisition-date-attribute-for-dynamics-ax-2012-cu7-feature/

Was this reply helpful? Yes No
Suggested answer

Ludwig Reinhard Microsoft Employee on at

Like (0)

Report

Hello Vaseem,

I had another look at some websites of auditing companies and also on this one financetrain.com/temporal-method-for-translation-of-foreign-statements

Based on what is stated there the standard currency translation type "transaction date" setup at the GL level should be able to do the job. This is also stated in the MS MR Whitepaper here: www.microsoft.com/.../details.aspx

Hope this helps,

Ludwig

Was this reply helpful? Yes No
Suggested answer

Community Member on at

Like (0)

Report

Thanks a lot April. This is the exact solution I was looking for FA. Is there any similar attribute to cover Inventory FIFO valuation based on historical rates?

Was this reply helpful? Yes No
April Olson on at

Like (0)

Report

Vaseem,

I checked in with the Inventory team and they mentioned they do not have that feature in place right now, but are considering it for the future.

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Hello April,

We did some testing in the Vanilla AX. We created a new Fixed asset, updated the acquisition date to 2006 then we posted a journal for 2016 and the acquisition date for the FA created was updated with the Journal posting date of 2016.

Any hotfix to fix this cuurency translation solution for AX 2012 R3 CU8?

Thanks for your help

Thanks,

Vaseem Syed, PMP, ITIL

Sr. Business Systems Manager|Superior Energy Services|11330 Clay Road, Suite 200, Houston, 77041

( 713-983-2493|✆281-928-4390 |✉vaseem.syed@superiorenergy.com

Was this reply helpful? Yes No
April Olson on at

Like (0)

Report

The acquisition date was added back in 2014 to AX and Management Reporter, so if you are using AX 2012 R3 and Management Reporter CU7+ you should see the field.

Was this reply helpful? Yes No
CliffThapa on at

Like (0)

Report

Hi April, The FA Acquisition date needs to be in the past so that we can capture historical exchange rate.

For this I created FA, updated the acquisition date in the value model with older date (Eg - 1/1/2016) and I posted a FA acquisition journal today on 6/23/2016. After I post the fa journal, the acquisition date in the value model gets I updated as 6/23/2016. This also updates the GeneralLedgerAccountEntry table's> Historicalexchangeratedate field. Therefore when we run the MR report for FA's historical value, it is calculated at the exchange rate of 6/23/2016 and not at 1/1/2016.

We can manually update the acquisition date in the value model but it does not update the generalledgeraccountentry table's HistoricalExchangeratedate which seems to be the date that is being used for MR's calculation of FA acquisition .

Any advise ?

Was this reply helpful? Yes No
April Olson on at

Like (0)

Report

You would have to get that date updated in the general ledger account entry. I think your only option would be to manually update this field in the tables on the GL side. I will check with the Fixed assets PM though just in case there is a way from the UI.

Was this reply helpful? Yes No