Help! setting up currency gain/loss posting setup

Help! We can’t get this to work properly. Where did we go wrong?

Condition:

  1. Make PO to buy Raw Mat (for production) on 7/26 in USD. Exch rate for that day is 10000:1 (USD:LCY)

  2. 8/2 goods arrive. Exch rate that day is 9000:1 (USD:LCY)

  3. 8/15 receive vendor invoice. Exch rate that day is 8000:1 (USD:LCY)

  4. 8/30 pay vendor. Exch rate that day is 7000:1 (USD:LCY)

The PROBLEM is I cant make Navision post the gain(or loss) of forex. There is a gain because at Receiving date, the FCY is more expensive than when we receive the vendor invoice and when we pay. So practically we have to pay less in LCY when paying the vendor on 8/30, thus it is a gain. For those of you who are in a similar situation, how did you setup Navision to reflect currency gain or loss that occurs due to the timing difference between when we make a PO and receive the goods, and when we receive the invoice and pay the vendor.


To backtrack to a very basic question, what exactly does the concept of currency gain or loss in Navision apply to? Does it apply to the above case?

Standard NAV takes the nearest known ExchRate before the transaction (posting) date, so check if you have entered Rate for every day, when something is posted in respective currency. There will be no warning, that for some particular date rate isn’t entered and an older one is used. If Exch.Rate exist for dates needed, there should not be any problems with Gain/Loss if you have set up all appropriate G/L Accounts (if you have not, then a message should appear, that setup is incomplete…)

In my country we have a legal requirement to use officially stated Exchange Rates for the date of transaction, but it was really difficult to implement this in localization, so I had the same problem, while users posted foreign currency transactions not knowing that wrong rate is being used.

Hi Modris, thx for your input.

In the currency card, there is a setup for where to post unrealized and realized gains and losses.

Do I setup this in the acc card of the USD? (foreign currency).

At the moment, we do not have a currency card setup for the local currency. Do I have to create a currency card for the LCY and then also setup the posting setup for unrealized and realized gains and losses in the LCY card?

You SHOULD NOT enter your LCY in Currency cards - it will mess up the whole system !!!

Remember, always an empty Curr.Code field is used where LCY is suggested. So, the only place where code for your LCY appears is in GL Setup/ LCY Code!

However, for all foreign currencies in use you should create a Card and fill in all G/L Accounts for Realized/Unrealized Gains/Losses. Other fields are commonly set up appropriately if you copied the Currencies table from Demo company upon implementation. Its the common way if setting this up - copy Currencies from Demo and then delete currencies never used.

Thanks for clearing that up. We do not have LCY setup anywhere except in the GL Setup > LCY Code field.

We got confused because the amount it posted in the realized and unrealized gains or losses does not match up with what we calculated manually for that particular transaction scenario.

Does the unrealized and realised gain or loss account have to be different accounts, or can the unrealized and realized gains be directed to one account (same also with the loss).

When would Navision post into unrealized account? I am having a hard time visualizing it.


Another confusion:

  1. The PO is created on 7/26.

  2. When the vendor invoice comes, 8/2 and we enter into the system, we are on the next exchange rate period, so when we want to post invoice, it asks “do you want to update exchange rate”. If we say yes, then it asks us to reopen the PO. This is not practical because the Purchaser is located in our factory, which is not in the same office as our accounting/finance.

Question: Is there a way to update exchange rate when we post vendor invoice, WITHOUT having to reopen the PO?

If your calculations didn’t match, seemingly it’s the case I mentioned before - not the same Exch.Rate was used by NAV as you did.

Its upon your choice to have one single Account or 2 or 4 different - ask your accountants, how they are willing to see it [:D]

Realized comes mainly from Purchases/Sales, Unrealized - if for example an amount of USD 10K simlpy sits in Bank with no movement, but rate changes, an so the equivalent in your LCY.

If you are allowed to POST an invoice, you may reopen it, too. There are some other weird cases, when you must Reopen a Invoice just for some minor things, but that’s how it works in NAV and can’t be changed easily, if at all…

Thanks v much for your time in posting…one last question (hopefully) [:)]

  1. Let’s say we receive Raw Mat A (purchased in ForeignCY) on 1/28.

  2. The next day, 1/29, (invoice not received yet), we use RM_A in production.

  3. The next day, 1/30, the FinGood containing RM_A is sold. The cost that is recorded as COGS will be the LCY value of RM_A for which day? (using which day’s exchange rate? 1/29 or 1/30?)

  4. One week later, 2/7, we receive the invoice. Because exch rate is diff, when we receive we reopen the PO and change the exch rate.

  5. Then one week later, 2/14, we pay the vendor.


The exch rate when COGS was recorded is different than exch rate when we pay the vendor. So the LCY amount of RM_A in the COGS and the LCY amount when we pay the vendor for RM_A is different. This is the gain or loss in currency.

BUT, if you HAVE to reopen the PO when you record vendor invoice on 2/7, but by then the goods is already sold on 1/30, and the month of Jan is already closed…how will this affect my COGS?

If we run process to adjust posting to reflect exch rate…but in the books Jan is already closed…what will happen, will we have to close Jan a second time, because now some values will change again??

I am confused. [:S] My accounting guys are confused. [:S]

COGS is not so easy to explain in short - you should rather check the Inventory Costing manual (from inst CD)

Briefly, there are different methods - immediate COGS posting to G/L or afterwards by batch job, this depends on settings. Then, how the Adjust Cost-Item entries batch job behaves depends from NAV version, and how & when adjusments are posted if period is closed is explained even in Help.

Looks like we have similar legal requirements, I can add to above that we needed to modify that batch job always to use original transaction date for adjustments, too - never mind period closed or not meanwhile its in current FY.

Hope this helps,

Thank you for your help. It will help us decide what kind of modification we need, or how we need to change internal procedures to reflect Navision.