Foreign Currency Revaluation in Microsoft Dynamics 365 Business Central

Microsoft Dynamics 365 Business Central (BC) allow users to account for foreign currency transactions. BC also able to translate the registered foreign currency amount into functional currency that setup in the entity using the conversion rates which setup in Exchange Table.

 

Due to the exchange rates fluctuate constantly, as a dollar worth in foreign currency today might not equivalent to the same foreign currency worth the next day. Hence, users are required to adjust the open documents that transact in foreign currency which include open invoices, credit memos, and advance payments. Once the open documents transacted in foreign currency is revalued, the gain and loss which calculate after comparing the closing rates at the period end will be posted to profit and loss as unrealised gain and loss, ensuring that the subledgers and general ledger can be reconciled.

 

This process can be done using Adjust Exchange Rate in BC, a batch job to adjust the exchange rates for Receivables, Payables and Banks.

 

Step 1 – Setup Accounts and Closing Rate for Currency Revaluation

Page: Currencies

1.       The accounts code for Realised/Unrealised Gains and Loss must be assigned before Currency Revaluation can be used. By having 1 set of account with match with 1 set of currency gives better clarity when come to analysis later.

2.       To setup the closing exchange rate, select the Exchange Rate, this will zoom into the Currency Exchange Rates page.                 

 

3.       The closing rates must be entered in Relational Adjmt Exch Rate Amount field. The field will accept max 7 decimal place.

Step 2 – Perform Currency Revaluation via Adjust Exchange Rate batch job

Page: Adjust Exchange Rate

As I’m doing month end closing for May’2022 account, I will need to perform currency revaluation for all the “USD” open documents in AP and AR, and also the Bank Accounts in foreign currency as of 31^st May 2022.

1.       Leave the Starting Date blank, to ensure all documents are that are open will be revalued.

2.       Ending Date will be the cut-off date. This date will usually be the same date as the Posting Date.

3.       Posting Description is the description that will be posting to General Ledger entries for the unrealised gain/loss transaction.

4.       Posting Date specifies when is the unrealised gain/loss be posted in financial period.

5.       Document No. specified the document number that will appear in General Ledger entries.

6.       Select Adjust Customers if you need the Adjust Exchange Rate to revalue Receivables open documents.

7.       Select Adjust Vendors if you need the Adjust Exchange Rate to revalue Receivables open documents.

8.       Select Adjust Bank Accounts if you need the Adjust Exchange Rate to revalue Cash and Banks balances.

9.       Set the Filter: Currency to “USD”. Leaving the field blank means the system will going revalue all foreign currency that setup in this entity.

10.   Select OK to proceed on Currency Revaluation job.

11.       BC will scan through the Bank Account, Customer and Vendor ledger based on the the Adjust Exchange Rate options.

12.       The following message shows the currency revaluation process has complete.

Step 3 – Examine posted entries

        1.       The summary of posted entries which result from Adjust Exchange Rate can be found in Exchange Rate Adjustment Registers page. The amount adjusted for each open documents will be display at Adjusted Amt. (LCY) column.

            2.       The details of the posted entries can be found in General Ledger Entries by filtering the Source Code for “EXCHRATADJ”.

            

            3.       To check further details of the entries, select Find Entries from the Entry action.

            

            4.       The previous Adjust Exchange Rate batch job has adjusted all 3 modules together.

            

            5.       Zooming to the respective Detailed Ledger Entries, will gives better view of how the Adjust Exchange Rate batch job earlier affecting the amount. Take for example below by zooming to Document number “PJ0000014” in Detailed Ledger Entries from Vendor Ledger Entries.

        

            6.       The following entries showing the value of the purchase invoice of “PJ0000014” has increased $720 by the time of revaluation is performed, hence system is creating an entry with “Unrealised Loss” entry type to adjust the Vendor Ledger, and General Ledger entries which posting to Control Account (Accounts Payable in this example) and unrealised gain/loss account.

            7.       The rate adjustment will be reflected in Aging as well.

For more understanding of Currency Accounting Revaluation and Translation

https://www.iasplus.com/en/standards/ias/ias21