Issue

What are the requirements for using Navision Financials Consolidation functionality when dealing with foreign currency Company Consolidations?

Note - How can I make sure that these Consolidations are done in accordance with FASB 52?
Solution

This Help Document is provided to give assistance for utilizing the Navision Financials Additional Reporting Currency functionality and processing Consolidations in Navision Financials Version 2.01.A and later.

1. Navision Financials Versions beginning with Version 2.01.A and all Navision Attain Versions provide functionality to use the additional foreign currency reporting functionality already in the the General Ledger Functional Area of the application.

In using these options along with properly monitoring the currency Table in the Subsidiary Company, a Customer should be able to fully comply with FASB 52 requirements.

The G/L Account Card has a 'Consolidation Currency Valuation Method' field that provides the flexibility to deal with the different currency requirements under FASB 52. This field has 4 options: Automatic, Current Rate, Historical Rate, and Manual Rate.

The following is a brief explanation of each option. With the exception of consolidating using the Import Consolidation as noted in 4. below, these settings must only be dealt with in the Subsidiary Company's (ies') Chart of Accounts.

Automatic: The Automatic option is provided for compatibility with versions of Navision Financials previous to 2.01.A. The system will automatically use conversion for Balance Sheet and Income Statement Accounts based on the Current Rate and Average Rate. This is the default configuration. On the Periodic Activities | Consolidation | Business Units screen, there is the Exchange Rate option button. This option button allows you to set up the Income Statement, Balance Sheet and Last Balance Sheet Exchange Rates.

Current Rate: Conversion will force using the Current Rate for the Account. The Current Rate is utilized for all Assets and all Liabilities under the Current Method of Accounting for foreign currency transactions. The Temporal Method allows the utilization of the Historical Exchange Rate for Inventory. In addition, all Non-current assets and Equity Accounts, including Dividends, will utilize Historical Rates using the Temporal Method. Therefore, depending on the implemented method for handling foreign currency transactions under FASB 52 that is being utilized, you will use the Current Rate as discussed above. On the Periodic Activities | Consolidation | Business Units screen, there is the Exchange Rate option button. The Balance Sheet and Last Balance Sheet selections will allow you to set up the Current Rate for the current and the previous Consolidation periods. It is important for these to be set up properly so that the previously consolidated balances will be converted properly to the current Exchange Rate.

Historical Rate: With the availability of the Additional Reporting Currency in the Navision G/L, all G/L transactions will be converted to this currency. With this functionality, an Exchange Rate that is in existence at the time of the transaction will be used for the translation calculation. Because of this, entries can be made and tracked using the currency at the Date of the original posting of the entry. Dividends, original Equity Investments, Inventory, and Fixed Asset Purchases would apply this Historical Rate for posting.

The key factor in utilizing the Historical Rate Method is that the Foreign Subsidiary must have the Additional Reporting Currency under General Ledger | Setup | General Ledger Setup on the Reporting tab set to the Consolidation Company's currency. This allows all transactions entered through the system to be entered with a converted amount to the Consolidation Company's currency. Rather than converting the amount using a stated average Exchange Rate for these transactions, no conversion is required because the actual Historical Transaction Exchange Rate is used. FASB 52 allows this detailed conversion rather than using the average Rate.

Manual Rate: This option will use the average Exchange Rate entered on the Business Unit Consolidation for all transactions entered during the Consolidation period. This average Rate is the one entered in the Income Statement selection under the Exchange Rate button on the Periodic Activities | Consolidation | Business Units screen.

2. Set-up on the G/L Account Card. Set up requirements on the Account Card includes setting up the Consolidated Debit and Credit fields on the Consolidation tab of the G/L Account Card in each Subsidiary Company. These Accounts must match the Consolidated Parent Company Chart of Accounts.

3. Set-up requirements also require Setup | General | Departments and Projects be set up with a Consolidation Department and Project Code in Navision Financials Version 2.01 through 2.60 if the Consolidation is going to include Department and Project detail. In Navision Attain, select Setup | Dimensions | Dimensions, select the Dimension button and select Dimension Values. In the Dimension Values Table, the Consolidation Codes must be established for all Dimension Values that will be included in the Consolidation process.

4. Additional set up requirements exist for the Consolidation if you are consolidating Companies outside of the Consolidation Company's database and using the Export Consolidation feature. If a Consolidation is using the Function | Import Consolidation from the Periodic Activities | Consolidation | Business Unit screen, then the Chart of Accounts in the Consolidation Parent must have a Chart of Accounts properly set up with the appropriate Consolidation Currency Valuation Method on each Account Card. This is required because the system will look to the Parent Company's Chart of Accounts for determining which Accounts were brought in using the appropriate Currency Valuation Method and making sure that those Accounts' Balances are properly converted to the new Current Exchange Rate during the import of the current data being consolidated.