How to properly set up Navision Financials / Attain / MBS for multiple currency and reporting

Solution Requirements

The Multiple Currencies Granule must be purchased and have Navision Financials Version 2.00 or above.

Background Information Related to Foreign Currency Reporting

FASB 52 is the official pronouncement from the Financial Accounting Standards Board related to Foreign Currency Reporting. In FASB 52, the 'translation process' is defined as 'the process of expressing in the reporting currency of the enterprise those amounts that are denominated or measured in a different currency.'

The translation from one currency (Company's functional currency) to another currency (reporting currency) can be handled through one of two methods defined by FASB 52. These two methods are the Current Method and the Temporal Method.

The Current Method handles translation as follows: use the current Exchange Rate as of the Financial Statement Date for converting the Balance Sheet Accounts (except for the Equity Accounts, which use Historical Rate); use the average Exchange Rate for the year for converting the Income Statement Accounts (or the specific Rate for the Transaction Date); use the Historical Exchange Rate for Dividends (Rate on Date of Dividend Issuance); and records the difference as a gain/loss under the Equity Section of the Balance Sheet.

The Temporal Method is more complex to implement. This method requires remeasurement as follows: use the current Rate for Cash, Receivables, and Liabilities; use the appropriate Historical Rates for Fixed Assets, Inventory, and Capital Stock; use the average Rates for Income Statement Accounts (except for Depreciation and Iinventory, which are at Historical Rates); and gain/loss on remeasurement reported on the Income Statement.

The Current Method is the method used most often in reporting for foreign currency transactions. However, in cases where a country's functional currency is in a highly inflationary state (cumulative percentage of over 100% inflation over a 3 year period), use of the Temporal Method is required.

Click on Attachments to view a table that summarizes the differences between the Current and Temporal Methods.

Navision Financials 2.0 uses the Current Method for translating foreign currency transactions through the utilization of the Periodic Activities | Currency | Adjust Exchange Rates. Also, because Navision Financials allows for Multi-Currency reporting with the Additional Reporting Currency, all of the requirements for the Temporal Method will also be met. By updating the Currencies Exchange Rate Table to the latest Rates, all transactions will be posted using that correct Rate at the Transaction Date, thus applying the Temporal Method initially. If the user wants to update to the latest Exchange Rate, the Periodic Activity can be run to update those Accounts that require updating to the Current Exchange Rate.

One additional issue deals with Budgeted Amounts using the Additional Reporting Currency. As a generally accepted practice, a Budget is established at the beginning of the year in the Additional Reporting Currency using a projected average Exchange Rate for the year, and will not get adjusted during the year for currency Exchange Rate changes. Therefore, when running the Periodic Activities to Adjust Exchange Rates, the Budget Amounts should not be adjusted. Therefore, a separate Budget will need to be established with amounts already converted to the Additional Reporting Currency.

See attachments for additional detailed information.