De-mystifying Currency Revaluation in Microsoft Dynamics GP

In our global economy, multicurrency accounting is becoming more and more common. But for some financial professionals (and even ERP consultants), multicurrency accounting can send shivers of fear and confusion down their spines. In particular, the process of month-end currency revaluation can seem especially daunting. However, with the power of Microsoft Dynamics GP, currency revaluation can become a stress-free part of your month-end close process.

Currency revaluation is the process in which Microsoft Dynamics GP retranslates foreign currency month-end balances at the month-end exchange rate. The difference between the previously translated month-end balance and the retranslated balance is a currency gain or loss on exchange, often recorded as an "unrealized" gain or loss. Revaluation is typically performed for balance sheet "control" accounts such as accounts payable and accounts receivable, but GP can be configured to revalue any financial account necessary.

Let's look at an example where a company has functional currency of U.S. Dollars (USD), and is invoicing their overseas customers in Euros. As Euro invoices are generated throughout the month, GP Multicurrency Management translates each invoice to USD based on exchange rates that have been saved to the exchange rate table.

Multicurrency Exchange Rate Maintenance Window

In the following example, we generated two Euro invoices on the 10th and 20th of the month that were translated to USD using the rates from the exchange table.

 Invoice Date Orig Amt (EURO)  Functional Amt (USD) FX Rate 
 3/10/2017  €10,000  $11,000  1.1 (from GP exchange table)
 3/20/2017  €20,000  $24,000  1.2 (from GP exchange table)
Total  €30,000  $35,000  1.1666667 (blended)

The resulting USD total receivable represents a blended rate of the two transactions. In accordance with GAAP standards, the month-end Euro balance of the receivables account must be revalued at the month-end spot rate. GP easily accomplishes this through the Multicurrency Revaluation process.

First, there are some required setups. In our example, the receivables control account 000-1270-00 must be configured for revaluation by going to Financial > Cards > Account Maintenance, selecting the account and clicking the ‘Currency’ button.

Select Account Currencies window

In the Select Account Currencies window, the ‘Revalue Account’ checkbox must be marked and the appropriate currencies selected.

Second, the currency posting accounts must be configured under Financial > Setup > Currency Accounts. For our example, the Unrealized Gain/Loss accounts will be used.

Multicurrency Posting Account Setup

To perform the revaluation, we go to Financial > Routines > Revaluation to access the Multicurrency Revaluation window.

Multicurrency Revaluation Z-EURO

  1. Enter a Revalue Option name. You can create multiple options, each with different saved parameters.
  2. Select ‘Print Report Only’ to test the revaluation by printing the revaluation report without posting the results. Select ‘Post’ to print the report and post the resulting entry.
  3. Set the Calculate Gain/Loss option. The default is ‘Unrealized’, which is the typical setting.
  4. Enter the month end date as the Posting Date. If you want the gain/loss to be reversed (i.e. accrued), mark ‘Reversing Transaction’ and enter the Reversing Date.
  5. If you are revaluing a prior period, change the period drop-down to ‘Other Period’ and select the appropriate Period number.
  6. Check the box for each currency to be revalued. You can revalue multiple currencies simultaneously, or setup different options for each currency. Select ‘End of Period’ to default the end of month rate from the exchange table.
  7. Use the ‘Restrictions’ button to set ranges of posting accounts or account segments to be revalued.
  8. Click ‘Revalue’ to process the revaluation. The Revaluation Journal report displays each revalued account with its originating balance, blended rate, and functional amount. The Unrealized Gain and Loss columns reflect the calculated revaluation amount.
Screen Output - Multicurrency Revaluation Report

In our example, the originating balance of €30,000 is revalued at the month end rate of 1.3, which totals $39,000 USD. The functional balance of the account is currently $35,000 USD, which results in an unrealized gain of $4,000 USD ($39000 - $35000 = $4000). Note that the calculated gain or loss amounts are always recorded in the functional currency.

If you selected to post the results, the revaluation process creates a General Ledger journal entry to record the exchange gain or loss. In our example, the $4,000 USD gain is recorded to the Unrealized Gain account 000-7200-00 from the Multicurrency Posting Account Setup. The offset is recorded to the original account 000-1270-00 as shown below.

Transaction Entry

It’s as simple as that! Please contact us for answers to your GP Multicurrency questions.

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