Incorrect Exchange Rate when reversing foreign currency project invoice

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Posted on by ZvikaR

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We have an AX out of the box behavior that is causing us trouble.

If you create a project invoice in foreign currency (=not the accounting currency) on one month, and then you want to reverse that invoice in a following month, you get an issue with the reversal amounts as posted to the GL (and to the tax ledger)

[for example - USD invoice, in a EUR based company

Original invoice was USD 1,000 --> EUR 800

The reversal is USD -1,000 --> EUR -850]

AX uses for the reversal the exchange rate in the time of the reversal, and not the exchange rate of the original invoice.

As a result we are left with unequal amounts in accounting currency on the revenue account#

Worse off - when we need to report our total sales/purchases and VAT amount, they would show up as if we had a sales balance with the client (while in fact, we have sold 0 to them)

Anyone encountered this issue? How to address it?

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Ludwig Reinhard Microsoft Employee on at

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Hi Zvika Rimalt,

Have you tried running a foreign currency revaluation in the AR module to get the foreign currency balance amount corrected?

Best regards,

Ludwig

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ZvikaR 168 on at

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I think I may have not done a good job explaining my issue.

Foreign currency revaluation will post the difference into ledger accounts for "unrealized Frx gain/loss".

In a similar way, settling the invoice with the credit note will post the difference into ledger accounts for "realized Frx gain/loss".

In this case I am trying to "cancel" an invoice - so to completely "eliminate it".

Out of the box in AX when you use the "reverse transaction" functionality in the vendor transactions or customer transactions form, the system uses the original exchange rates during the reversal.

However in the project module the behavior seems to be different - the exchange rate used is the one in effect at the time of the reversal.

This means that if I try to report on client revenue, I see an amount (despite the fact I fully cancelled the invoice), and I even retain balance of VAT.

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Community Member on at

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Hi Zvika. We have the same issue. Did you find the solution?

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Syed Fasih 2,442 on at

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Hi Zvika

The transactions are recorded based on the prevailing exchange rates. When the invoice of USD was recorded, it was translated on the exchange rate as at that date. Similarly, when the invoice is reversed, it will be reversed using the exchange rate prevailing on the reversal date. This is inline with the IRFS/US Gaap requirements.

If another exchange rate is to be used, then I will suggest to create credit note and then use the desired exchange rate on the credit note.

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ZvikaR 168 on at

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Syed, I am not an accountant myself, but the accountants I work with are telling me the reversal (this is not a credit note, but a cancellation of the original invoice) of an invoice should be using the same exchange rate as the original invoice.

If you are correct, and IFRS calls for using the contemporary exchange rate, how come the invoice reversal functionality for AP invoices behaves differently?

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Syed Fasih 2,442 on at

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Perhaps to need to see the reversal date of the AP invoices. If the reversal entry is done on the same day or the posting date is the same day, then it will use the old exchange rate.

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Johan_K on at

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Hi,

Zvika my customer seems to have the same issue as you.

Have you found any solution?

Regards Johan

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ZvikaR 168 on at

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Hi Johan and Tatyana,

Our problem was actually bigger.

On the version we were on (AX2012 R2 CU6), not only the credit note used the new exchange rate and not the original one, but in addition, the parallel posting into the VAT sub ledger was using the original exchange rate - inconsistent with the posting to the AR / GL.

As a result, not only we did not like how reversal was behaving we were also getting a discrepancy between the GL and the VAT sub-ledger (I advise you to test and see if such thing is happening for you as well...)

When we tested the latest version of R3 at the time (I think it was CU11) we realized Microsoft made the posting consistent - so we could live with that as long both ledgers behaved the same (when settling the invoice with the credit note AX will post the difference into the Realized Exchange Rate Gains/Losses - so we had something that was making our total revenue correct.

HOWEVER, I just tested on CU12, and in CU12 the credit note DOES NOT POST AT ALL (it tried to post a voucher when the credit uses the old exchange rate, and the debit side uses the new exchange rate - which does not balance and does not post) - I think you could raise a defect request for Microsoft.

Sorry I don't have better news.

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Johan_K on at

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Ok, I see, we didn't have any discrepancy between the GL and the sub ledger. For us it was only the summary account for the accounts receivable that didn't took the correct Exchange rate and used the exchange rate from the date when the credit note was posted.

But we got a tip from Ludwig Reinhard to use the fixed rate on the project contract and set that to the exchange rate for the date when the original invoice was posted. So we were able to work around our issue that way.

But I have suggested that they should give this issue to Microsoft support because it seems like there is something wrong.

I don't know your issue Tatyana but maybe you could try the fixed exchange rate as well.

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ZvikaR 168 on at

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What CU of AX 2012 are you on?

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