I’m just wondering if can map the following scenario in NAV.
My client wants to maintain two books in the system, one for financial reporting and one for Tax purpose. The functional currency of the system should be USD and the financial reporting would be in USD as well. Now for the TAX reporting they want to use COP[Columbian Currency] which is the local currency of the country. This can be fulfilled with the additional reporting currency option.
Now the issue comes :-
For financial reporting purposes - FX gains and losses on monetary assets and liabilities denominated in currencies different from the functional currency. So, if we have a company in Colombia, and it is determined that the functional currency is the USD, then NAV must calculate FX gains and losses on monetary assets and liabilities denominated in currencies different from the USD.
For tax purposes – NAV must be able to keep books “as if” the functional currency is the local currency (COP). This means that for this tax book, NAV must calculate FX gains and losses on monetary assets and liabilities denominated in currencies different from the COP.
Does anyone have come across such scenarios?? Appreciate your valuable advices.
How assets are valuated/depreciated is one of the most common differences between IFRS (international financial reporting standard) and some local GAAP’s (generally accepted accounting principles). It is also very common that even within countries to have tax laws and local gaap which are different.
Normally it is handled by the fixed asset module and having the auditor do the rest (manually). In the FA module you have the ability to have two different depreciation books. You then have the standard book linked to G/L and do the tax book “manually”.
The FX issues in South America are something a little different. Not quite sure the Fixed Asset module would be much helpful here. Unlike other ERP systems, then NAV doesn’t really handle having multiple books. Typically the “Tax Book” is typically done outside of NAV, as it only has to be present once a year, when reporting taxes.
The only scenario I can imagine is something where you have two mirrored companies, which keeps all transactions in both systems with only the FX settings differently.
Or you could need to use X-accounts (accounts numbered, so they appear off the chart of accounts) and have an account schedule be the tax book including the x-accounts. As to the actual “reversed” FX calculation functionality, this would need to be developed as it does not exists. It is nothing standard.
I would imagine that other South American companies have similar requirements. Have you tried to reach out to other partners in your region?