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The basics of currency capabilities in financial reporting with Dynamics 365 Finance
When companies have expanded across the world, it’s important that reporting currency is in one currency to make sure that it’s easier to understand and follow financial documents. For example, Microsoft has offices all over the world with different functional currencies, however their headquarters are in Redmond, WA, therefore their reporting currency is in US Dollars.
Financial reporting in Dynamics 365 Finance includes features that support complex currency reporting requirements. Financial reporting can generate reports using any of the following currency amounts: accounting currency amount, reporting currency amount, transaction currency amount, and translated amount (currency translation is also known as conversion), translated to any currency that has been set up in the system. Read further to understand how Dynamics 365 Finance can help with financial reporting with different currencies.
Filtering by currency
By default, all report amounts are summarized and presented in the accounting currency of the relevant company. If you need to do additional analysis by the transactions and related currencies, you can do so by setting filters on the report.
- In the column definition, you can use the Currency filter for any amount column. You can also specify the ISO code of the currency you want to restrict the column to. When you set the column to a specific currency, only transactions entered for that currency will be displayed.
- In the row definition, you can specify a Row modifier with the attribute set to Transaction currency with a currency code listed as the restriction. When you restrict the row to a specific currency, only transactions that are entered for the matching currency will be displayed. This is also the case when you restrict a column to a currency.
Reporting on currency
By default, any amount appearing on a report will appear as the accounting currency amount. Any of the following actions will cause some level of translation to take place:
- Modifying the Currency display field in the column definition to Reporting currency from Ledger, which will bring back translated amounts that are calculated in the Reporting currency
- Modifying the Currency display field in the column definition to Transaction currency, which will force the report to total different currencies together and display the entered amount in the column, regardless of currency
- Modifying the Currency display field in the column definition to any of the Translate to… options, which will perform the currency translation within Financial reporting
Additionally, the following actions will also cause translation:
- Use of a reporting tree to summarize multiple legal entities with different accounting currencies. Amounts will be translated to the accounting currency based on the legal entity specified in the report definition or the current company context if the @ANY company is used in the report definition. You will see the currency being used in Report Designer near the top of the page with text stating “Values will be displayed in USD” when US dollar is the accounting currency of the current company.
- Using the Currency button in the web report viewer will cause one additional version of the report to be generated, overriding the accounting currency if it wasn’t previously specified. Using the Include all reporting currencies button in Report Designer will cause additional versions of the report to be generated using translated data for each currency selected.
Setup for Exchange rate type
The exchange rate type defines the table of exchange rates and currencies to be used. The exchange rate type can be set in multiple locations.
- You can set the exchange rate type on the Main accounts page within General ledger; there is an option for Exchange rate type on the Financial reporting FastTab.
- You can also specify an override of an exchange rate type for a legal entity, which will override the default behavior.
- If no exchange rate type is specified for a main account, the exchange rate type will default from the ledger.
Setup for Currency translation type
The Currency translation type will determine how each main account is translated. Currency translation rate type can also be set in multiple locations.
- Within the Main accounts page in General ledger, there is an option for Currency translation type on the Financial reporting FastTab.
- You can also specify an override of a currency translation rate type for a legal entity, which will override the default behavior.
Setup for Retained Earnings
Currency translation for retained earnings accounts is subject to some specific requirements:
- Any retained earnings account must be assigned to the Retained earnings main account category Reference ID of 29 on the Main accounts page if the account balance should be translated using the appropriate calculation.
- If the default category was renamed, financial reporting still expects the original with Reference ID of 29.
You may have to personalize the form and add Reference ID as a column in order for this to display on the page.
- The retained earnings account only translates system-generated transactions initiated through the fiscal year-end close process. If any transactions are posted directly, they will not be accurately reflected through translation.
- The retained earnings balance is translated at the rate that exists at the end of the most recently closed year. This means that it is a point-in time-calculation, not an accumulation of amounts and rates calculated from the beginning balance entered through today.
Functionality that was introduced in preview for Dynamics 365 Finance version 10.0.7 enables functionality for enhanced flexibility for consolidation and dual currency. To enable this functionality in preview, create a support incident for financial reporting to be enabled in a sandbox or development environment.
This feature improves the precision of calculations of retained earnings when earnings are calculated across multiple years using currency translation. When you enable this feature, any retained earnings account that has the Currency translation type field on the Main accounts page set to Transaction date will calculate the translated balance of the account using rates and balances from its entire history using the end-of-year rate X the balance for all years, rather than only using the most recent year and rate.
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