In Microsoft Dynamics NAV’s (formerly Navision) financial consolidation functionality, you can configure a consolidation across subsidiaries with different currencies. The consolidation translation method (Average, Closing, Historical, Composite) can be assigned according to the GL Account (this should be setup as prescribed by US GAAP, IFRS, or according to your local accounting standard). Under IFRS and US GAAP, accounts should be translated using the following methods:
- Equity accounts should be translated at the historical rate (spot rate on the day of the equity transaction).
- Asset and liability accounts should be translated at the closing rate (last day of the consolidation period).
- Income Statement accounts should be translated at the average rate (the average rate for the period).
Also under both US GAAP and IFRS companies should be consistent in how they retrieve published exchange rates (e.g. always using the same source). Some of our clients in the US would use the US Federal’s Reserves published rates but they no longer publish rate tables. www.oanda.com is a good and acceptable source for retrieving rates. Please comment below if you know of other sources which are used for public companies.
Unfortunately, Microsoft Dynamic’s NAV (formerly Navision) does not have great functionality for storing the average rate and closing rate for a period. Because a consolidation period in Dynamics NAV is not prescribed by the accounting period table in the system (the consolidation beginning and end date is entered each time a consolidation is performed), the consolidate function (“Import Database” and “Import File”) is setup to have the user enter the average rate and closing rate each time a consolidation is performed. The rate is not permanently stored in a table and therefore is lost if a user must go back and re-consolidate a prior period. This poses great risk to companies relying on the consolidation functionality in Dynamics NAV to formerly prepare their consolidated financial statements.
Our firm, EmergeNext, in conjunction with our joint venture partner, ADNM International, has developed consolidation enhancements for Dynamics NAV that cover a number of weaknesses. Click here to read more about these enhancements. If you have questions regarding how you should configure Navision (Microsoft Dynamics NAV) for performing financial consolidations, give us a call or use the contact widget below and a consultant will reach out to you as soon as possible.
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