MSDyn365FO: Foreign currency revaluation (General ledger and Accounts payable)

Want to understand foreign currency revaluation in Microsoft Dynamics 365 for Finance and Operations? Here are some cases that are sure to help.

Imagine the following situation:

We have the vendor invoice in the foreign currency, let’s say in USD. Reporting/accounting currency is EUR

INV#1: USD 6,492.30

Fx rate with which the invoice was originally posted is 73.000 (100 USD = 73 EUR)

As the result we have:

  1. open amount in transaction currency is USD 6,492.30
  2. non fx-valued EUR amount is EUR 4,739.38 (6,492.30*73/100)

In order to keep an updated record of the value of all open transactions in your accounting currency, at the end of each accounting period, your company will run Foreign currency revaluation process in AX.

What the system will do: the value of all open transactions (in our case it’s USD 6.492,30) will be translated into the accounting currency using the current spot exchange rate (let’s say 79 exchange rate).

Foreign currency revaluation (FX revaluation) result will be directly booked on the transaction and will be a part of AR/AP balance.

So, we have the invoice posted on January 28

Date Ledger account Transaction amount Accounting amount
January 28, 2019 618900 (Miscellaneous Expense) 6,492.30 USD (Debit) 4,739.38 EUR (Debit)
January 28, 2019 200100 (Accounts payable) 6,492.30 USD (Credit) 4,739.38 EUR (Credit)

Below you may find the Vendor transaction record:

Vendor transaction

Voucher of the vendor transaction:

Voucher of the vendor transaction

Current balance in transaction currency Current balance in accounting currency Exchange rate at revaluation New accounting currency amount Unrealized gain/loss
6,492.30 USD 4,739.38 EUR 79.000 5,128.92 EUR (6.492,30 x 79/100) 389.54 loss (5,128.92 – 4,739.38)

Let’s make sure that setup is corresponding to the example above.

The currency exchange rate that will be used upon revaluation is 79.

Currency exchange rate

Accounts that will be used for the currency revaluation can be found in the General ledger > Ledger setup > Ledger:

  • Unrealized gain
  • Unrealized loss

Unrealized gain loss

Account balances in foreign currencies can be revalued in General ledger module. As the result, all accounts that are marked as Foreign currency revaluation will be included into this process.

Main account

Also, this process needs to be run in the Accounts payable and Accounts receivable separately to revalue the outstanding AR / AP transactions.

To run Foreign currency revaluation in the General ledger, follow the steps below:

Go to General ledger > Periodic tasks > Foreign currency revaluation > Foreign currency revaluation

GL Foreign currency revaluation

Accounting entry will consist of the main account being revalued and unrealized gain or loss.

Highlight the completed Foreign currency revaluation task.

GL Foreign currency revaluation task

Click Voucher transactions button.

GL Foreign currency revaluation voucher

Date Ledger account Debit Credit
January 28, 2019 618900 (Miscellaneous Expense) 389.54
January 28, 2019 801400 (Unrealized loss) 389.54

To run Foreign currency revaluation in the Accounts payable, follow the steps below:

Go to Accounts payable > Periodic tasks > Foreign currency revaluation > Foreign currency revaluation

Within this process, each accounts payable transaction will be revalued.

AP Foreign currency revaluation

The result will be the next:

AP Foreign currency revaluation voucher

If you check Vendor transactions, you will notice that additional transaction is being created for the delta between the balance of the main account and the new value based on the exchange rate for the Date of Rate.

Vendor transaction revalued

Vendor balance will be affected as well.

Vendor balance revalued

Let’s imagine that this transaction was revaluated again in the next period. For this scenario, the exchange rate was slightly dropped off.

Current balance in transaction currency Current balance in accounting currency Exchange rate at revaluation New accounting currency amount Unrealized gain/loss
6.492,30 USD 5,128.92 EUR 75.000 4,869.23 EUR (6.492,30 x 75/100) 259.69 gain (4,869.23 – 5,128.92)

We would expect to have 259.69 posted as an unrealized gain.

Now, you will notice the difference between General ledger foreign currency revaluation process and Accounts payable.

For the Account payable process, the system will completely reverse the previous revaluation and will create the transaction for the delta between the balance of the main account and the new value based on the exchange rate for the Date of Rate: 4,739.38 – 4,869.23 = 129.85

For the General ledger process, the system will not reverse the previous revaluation and will create the transaction for the delta between the balance of the main account, including any previous revaluation amounts, and the new value based on the exchange rate for the Date of Rate: 4,869.23 – 5,128.92 = 259.69

GL foreign currency revaluation result:

GL foreign currency revaluation result

AP foreign currency revaluation result:

AP foreign currency revaluation result

Vendor transactions:

Vendor transactions Second run

Vendor balance:

Vendor balance Second run

That’s it!

Advertisements

One thought on “MSDyn365FO: Foreign currency revaluation (General ledger and Accounts payable)

  1. Thank you Galyna for writing such a wonderful blog. I have a query. I got vendor financial dimension on vendor invoice, however it didn’t flow to the unrealized gains and losses vouchers when I performed the foreign currency revaluation job. Is it something configurable in standard or a bug?

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s