financial consolidations, eliminations, foreign currency...

MICROSOFT DYNAMICS® AX 2012 R2:

FINANCIAL CONSOLIDATIONS,

ELIMINATIONS, FOREIGN

CURRENCY AND IFRS REPORTING

January 2013

Version 1

Microsoft Dynamics AX 2012R2: Financial Consolidations, Eliminations, Currency Revaluations, IFRS Reporting 2

Table of Contents

FINANCIAL CONSOLIDATIONS .................................................................................................................................. 3

INTRODUCTION .......................................................................................................................................................... 3

AUDIENCE ..................................................................................................................................................................... 3

SCENARIO...................................................................................................................................................................... 4

PROBLEMS THIS DEMO ADDRESSES .................................................................................................................. 4

KEY PAINS THIS DEMONSTRATION ADDRESSES ........................................................................................... 4

KEY COMPETITIVE POINTS ...................................................................................................................................... 5

DEMO PRESET CONFIGURATION ......................................................................................................................... 5

BEFORE YOU BEGIN ................................................................................................................................................... 5

DEMO OVERVIEW....................................................................................................................................................... 7

CONCLUSION............................................................................................................................................................ 45

DISCLAIMER ............................................................................................................................................................... 46


FINANCIAL CONSOLIDATIONS

INTRODUCTION

Microsoft Dynamics AX Financial Consolidations functionality allows users to combine

the financial results for several subsidiary companies into results for a single,

consolidated company. The subsidiaries can be in the same Microsoft Dynamics AX

database or in separate databases.

If the data for subsidiaries is recorded in foreign currencies, you can consolidate financial

results in compliance with Regulation FASB 52 of the Generally Accepted Accounting

Principles (GAAP). The GAAP are created and interpreted by the Financial Standards

Accounting Board (FASB) and the International Accounting Standards (IAS).

Depending on the translation method that is required in your country/region, you can

select different exchange rates for the various types of ledger accounts in the

consolidated company. You can also specify the account in the consolidated company to

which exchange differences are posted.

AUDIENCE

The demonstration in this document should be used to show the value of AX 2012 R2

Consolidations to a business decision maker (BDM) and accounting personas. The

following role examples represent key decision makers, selection process personnel and

influencers and/or evaluators:

CFO (Sara): Sara develops the financial plan and goals for the company and

continuously monitors performance against them. Others rely on her to assess

the financial viability of opportunities. Sara relies on Ken and Phyllis to provide

her with the information she needs for business insight.

Controller (Ken): Ken tracks the departments’ financial goals and continually

improves processes to achieve financial goals. He proposes and helps implement

changes to optimize performance. He may approve documents and payments.

Accounting Manager (Phyllis): Phyllis manages the accounting department by

processing general ledger transactions, reviewing and approving transactions,

and reviewing aging reports. She also ensures that her team accurately completes

financial procedures on time.

Accountant (Cassie): In an external role, Cassie either does the books (for a

small business), or audits the books (for any size company). In an internal role as

an employee, Cassie takes care of accounting duties within a complex finance

department.


SCENARIO

In Microsoft Dynamics AX 2012 R2, a consolidation (parent) company is created to report

financial results for a group of companies. A consolidation company called Contoso

Entertainment System, or GLMF, is one of the consolidation companies created in the

Microsoft Dynamics AX 2012 R2 demo data for this purpose. The financial data from the

subsidiary companies is consolidated into the GLMF company, and then a financial

report is created using the combined data. In this demo, Contoso Entertainment System

USA (USMF) and Contoso Entertainment System Germany (DEMF) are wholly-owned

subsidiaries within the Contoso Entertainment Group of companies. USMF and DEMF do

transact with each other and require intercompany eliminations during the consolidation

process.

PROBLEMS THIS DEMO ADDRESSES

The ability to easily consolidate subsidiary company transactions into a single

consolidated (parent) while supporting intercompany eliminations, foreign currency

revaluation and consolidated financial reporting in accordance with the different GAAPs

(e.g. US GAAP and IFRS).

KEY PAINS THIS DEMONSTRATION ADDRESSES

This demonstration shows how Microsoft Dynamics AX Financial Consolidations can help

address pain points that business users of a business application might experience:

Business

User

Key Pains Microsoft Dynamics AX 2012 R2 helps to address

Ken

(Controller)

“I need to be able to create consolidated financial statements

quickly and easily and without a lengthy training on the

application.”

Phyllis

(Accounting

Manager)

“I need a consolidation tool that will allow me to easily process

all our subsidiary transactions and bring them into the

consolidated group at the proper exchange rates, with proper

elimination and adjustments reflected on the consolidated

financial statements.”

Cassie

(Accountant)

“I need to be able to process intercompany eliminations and

make sure they do not cause out-of-balance situations during

the consolidation process, otherwise I am left to manually

reconcile these transactions.”


KEY COMPETITIVE POINTS

Flexible consolidation tool: Easily bring subsidiary transactions into the

consolidation company using specified exchange rates, based on user-defined

exchange rate types. Ability to run consolidations when and as needed, with

ability to remove transactions should the need arise. Ability to view consolidation

transactions through on-line consolidation inquiries. Rules-based elimination

rules provide flexibility in elimination processing.

Support of IFRS reporting requirements: Ability to support IFRS reporting

needs through the power of Dynamics AX build-in posting layers.

Foreign currency revaluation capabilities

DEMO PRESET CONFIGURATION

This script was written to work with the Microsoft Dynamics AX 2012 R2 Virtual Machine

(VM), released in December 2012. Make sure that the VM is up and running and you

have logged on. The script addresses key pain points and challenges that different roles

might face. However, the demo can be completed as the system administrator.

Domain: CONTOSO

User: Administrator

Password: pass@word1

BEFORE YOU BEGIN

Demo Pre-Setup

1. Start Microsoft

Dynamics AX 2012

R2

Open Microsoft Dynamics AX 2012 R2 and verify you are

logged into the USMF company.

2. Main accounts

form

Create 2 new main accounts in the Shared chart of

accounts (General ledger > Setup > Chart of accounts >

Chart of accounts):

o 300180 Reserve for Intangible Asset Revaluation

Main account type = Equity

o 120250 F/X Investment Account

Main account type = Asset

Foreign currency revaluation = Selected


3. IFRS

adjustment

journal

Create a new journal name (General ledger > Setup >

Journals > Journal names) called IFRS Adj.

o Journal type = Daily

o Create a new voucher series for this journal

name (right click in field and select View details)

Number Sequence Code = IFRSAdj

Scope = Company

Company = USMF

Segments: Remove Company segment

and change the Constant to IFRS-

General: Mark as Continuous.

o Set the posting layer = Operations.

4. General

journal entry

and Opening

transactions

For USMF: Re-open Period 12 Operating period for year

2011 and Periods 1-6 for year 2012 in the calendar

(General ledger > Setup > Ledger > Ledger calendar).

For DEMF: Re-open Periods 1-6 for year 2012 in the

calendar (General ledger > Setup > Ledger > Ledger

calendar).

Record and post a journal entry in USMF for December 20

of 2011:

o Journal name: GenJrn

o Primary account: 180140; BusinessUnit = 001

o Debit amount: 250.00

o Offset account: 300180; BusinessUnit = 001

Re-process the Opening transactions function in USMF (as

you posted a journal entry into the prior year). This will

bring the balances forward. General ledger > Periodic >

Fiscal year close > Opening transactions.

o End date: 12/31/2011

o Voucher number: 2011_ADJ

5. Consolidations Add the following account structures to the ledger in

GLMF company (General ledger > Setup > Ledger):

o Manufacturing B/S

o Manufacturing P&L


DEMO OVERVIEW

This demo introduces the basic steps required to do a financial consolidation in

Microsoft Dynamics AX 2012 R2. This demo provides an overview of the major concepts

to introduce you to key features and enhanced features that are available to users of the

financial consolidation feature in AX 2012 R2.


DEMO 1: SUBSIDIARY COMPANY SETUP

Scenario and Background

In Microsoft Dynamics AX 2012 R2, a consolidation (parent) company is created to report financial

results for a group of companies. A consolidation company called Contoso Entertainment System, or

GLMF has been created for this purpose. The financial data from the subsidiary companies is

consolidated into the GLMF company, and then a financial report is created by using the combined

data. In this demo, Contoso Entertainment System USA (USMF) is a wholly-owned subsidiary within

the Contoso Entertainment System group of companies.

In this demo, USMF and GLMF both share the same chart of accounts. However, if the chart of

accounts in the subsidiary legal entity does not follow the chart of accounts in the consolidated legal

entity, you can map the main accounts in the subsidiary to the main accounts in the consolidated

legal entity.

In this scenario, Phyllis, the accounting manager, will map a main account to a default consolidation

account.

1. In USMF, navigate

to the Main

accounts list page

(General ledger >

Common > Main

accounts).

2. Search for main

account 120250

and select to Edit

from the action

pane.

3. In the Default

consolidation

account field,

enter 1111 to

which the balance

of this account will

be transferred to in

the consolidated

legal entity.

4. Close the form.


In the scenario where the organization wants to use a shared chart of accounts across all legal entities but has

requirements for local reporting using a different chart of accounts for more than one other chart of accounts,

there is the option to set up consolidation account groups (General ledger > Setup > Chart of accounts >

Consolidation account groups). These user-defined groups provide support to map a single main account

value to multiple consolidation accounts (General ledger > Setup > Chart of accounts > Additional

consolidation accounts).

To prepare reports and financial statements for the consolidated legal entity that are based on financial

dimensions, if the consolidated legal entity financial dimensions are different than the subsidiary legal

entity financial dimensions, map the financial dimensions using the Group dimension field in the Financial

dimension values form (General ledger > Setup > Financial dimensions > Financial dimensions > Financial

dimension values). This mapping is similar to the previous steps of mapping a consolidation account to a

main account.

Definition of the subsidiary company’s accounting and reporting currency, as well as default

realized/unrealized gain/loss accounts and default exchange rate types can be found on the Ledger form

(General ledger > Setup > Ledger).

Unrealized gain/loss accounts: Defined as the system account for currency exchange revaluation

adjustments resulting in a gain or loss against the company’s accounting currency. In the source company,

this typically is a P/L account. In the consolidation company, it is typically a CTA (cumulative translation

adjusmtent account in equity) account.

Realized gain/loss accounts: Defined as the system account for currency exchange adjustments resulting in

a gain/loss when settling transactions such as customer or vendor payments against invoices. In the

consolidation company, realized gain/loss amounts are not applicable as you cannot record payments and

invoices in a consolidation company. Only elimination entries and closing sheet adjustments are allowed.


5. Navigate to the

Ledger form

(General ledger >

Setup > Ledger)

6. Note that the

accounting

currency and the

reporting currency

are set as USD for

USMF.

7. Close the form.

Exchange rate types allow users to define different exchange rates for the same pair of currencies, such as

CAD to USD or USD to EUR. Exchange rates need to be defined for all currencies that the company

transacts in.

A currency pair (From currency and To currency) can only be defined once for the same rate type. For

example, if you set up exchange rates from USD to CAD, you will not be able to set up exchange rates for

CAD to USD in the same rate type. The system will automatically calculate and use the reciprocal exchange

rate when converting CAD to USD in this scenario.

The reciprocal rate is calculated as (Quotation unit/Exchange rate).


8. Navigate to the

Currency exchange

rates form

(General ledger >

Setup > Currency

> Currency

exchange rates).

9. Select the

Exchange rate type

of Default.

10. Note that the

exchange rate for

USD to CAD is

102.7900 as of 1/1

2012. If a

transaction was

entered USMF in

CAD currency, the

system would

calculate the

reciprocal as

.9728572

(100/102.7900).

11. Close the

form.

To view the currency exchange calculation, enter a journal entry in CAD currency. USD is the accounting

currency for USMF.


12. Navigate to

the General journal

(General ledger >

Journals >

General journal)

13. Click New.

14. Select GenJrn

as the journal

name.

15. Click Lines.

16. Set the date

to 1/1/2012.

17. Enter the

primary account as

120250-001-023.

18. Enter debit

amount of 100.00.

19. Enter the

offset account as

250200-001-023.

20. Change the

Currency to CAD.

21. Go to the

General tab and

verify the exchange

rate is displaying

the reciprocal rate.

22. Post the

journal entry and

close the forms.

After posting the journal entry, you can view the posted journal entry.


23. Go to the

Main accounts list

page (General

ledger > Common

> Main accounts).

24. Search for

main account

120250.

25. Select Posted

journal entries

from the action

pane.

26. Note the

Amount in

transaction

currency (CAD) is

100.00 and the

Amount in

accounting

currency (USD) is

displayed as 97.29

in the Amount

column.

This demo provided an overview of the primary components of the subsidiary company setup that will be

used in a later demo on financial consolidation.

END OF DEMO SCENARIO 1


DEMO 2: FOREIGN CURRENCY REVALUATION (IN THE SUBSIDIARY COMPANY)


When you use multiple currencies, the exchange rate to convert the transaction currency to the

accounting currency can differ over time. To recognize the exchange rate differences, the accounting

currency (and/or reporting currency) amounts need to be adjusted with an unrealized gain or loss in

currency revaluation being recorded in the general ledger. The process that is used to make those

adjustments is called a foreign currency revaluation.

Microsoft Dynamics AX 2012 R2 supports foreign currency revaluation in the Accounts Payable,

Accounts Receivable and the General ledger. In this scenario, Phyllis, the Accounting Manager, will

use the Foreign currency revaluation form to complete a foreign currency revaluation for the

general ledger. She starts by verifying and/or updating the exchange rates.

1. Navigate to the

Currency

exchange rates

form (General

ledger > Setup >

Currency >

Currency

exchange rates).

2. Select the Default

exchange rate type.

Find the USD to

CAD currency pair

and note that the

exchange rate as of

1/1/2012 is

102.7900.

3. Add a new

exchange rate with

a start date of

1/31/2012 and a

rate of 101.00.

4. Close the form.

Phyllis will now run the foreign currency revaluation to adjust main account 120250 F/X Investment


Account.

5. Navigate to

General ledger >

Periodic > Foreign

currency

revaluation.

6. Specify 120250 as

both the From and

To Main account.

7. Specify a date

range of 1/1/2012

to 1/31/2012.

8. Specify CAD as

both the From and

To Currency code.

9. Select the Adjust

balance sheet

accounts option.

10. Click OK to

revalue the

selected main

account.

When the revaluation process is finished, balances that are in the accounting currency are updated to use

the currency exchange rate. An adjustment is also made for the reporting currency amount if the exchange

rate is different. For this demo, since the reporting currency is also USD, and adjustment has been made to

both the accounting currency and reporting currency amounts.


11. Go to the

Main accounts

list page

(General ledger

> Common >

Main accounts).

12. Search for

main account

120250.

13. Select

Posted journal

entries from the

action pane.

14. Select the last

entry (should be

the default

selection). The

amount in the

“Amount” column

is the foreign

currency

revaluation

adjustment amount

for the accounting

currency. A

separate entry

displays for the

adjustment to the

reporting currency

amount.

The offset account posted to with the foreign currency revaluation process is to the unrealized gain or loss

account defined on either the currency revaluation accounts form or the ledger. The system will first look to

the accounts defined on the currency revaluation accounts form as that is the most granular. If an account

does not exist, the system will then look to the ledger for the correct account to use as the offset.


15. Select

Voucher from

the action pane.

16. Click on the

Ledger account

column to sort

the data.

17. Note the

entry to the

unrealized gain

account.

18. In the last

column, the

posting layer for

each entry is

displayed. In this

scenario,

“Current” is

displayed, which

is the typical

layer used for

posting entries

for local GAAP

reporting. The

consolidation

process will pull

in the entries by

posting layer.

19. Close the

voucher form.

20. Close the

Account number

form.

Note: Demo

Scenario 3 covers

the topic of posting

layers as they relate


to IFRS reporting

requirements.

This demo provided an overview of the foreign currency revaluation process in the USMF subsidiary

company.



DEMO 3: IFRS REPORTING


IFRS and US GAAP are two different standards for financial reporting. IFRS are generally more principles-based

than the US rules-based approach. Convergence of the two sets of accounting rules is a high priority on the

agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards

Board (IASB).

Numerous changes have already occurred which bring the two standards together, yet differences still exist. For

example, the accounting treatment of intangible assets is an area where significant differences exist between US

GAAP and IFRS. Under US GAAP, revaluation of intangible assets is not permitted whereas under IFRS, revaluation

to fair value of intangible assets other than goodwill is permitted.

Microsoft Dynamics AX 2012 R2 currently supports the notion of multi-book via the use of posting layers. There

are 3 posting layers in Dynamics AX: one primary and two adjustment layers. Dynamics AX customers are utilizing

the “Current” layer for local GAAP reporting. The “Operations” layer is typically used for adjustments to comply

with IFRS and the “Tax” layer for adjustments related to tax reporting.

1. Navigate to the Trial balance list

page (General ledger >

Common > Trial balance)

2. Click Parameters from the

action pane. Note that the

posting layer currently shown is

“Current”.

3. Change the Posting layer to

“Only operations”, make sure

the date range is 1/1/2012 –

12/31/2012, and click Update.

4. At this point of the demo, there

are no operation layer journal

entries posted.

In this scenario, Phyllis, the accounting amanager, will post an IFRS adjustment to account for an intangible asset

revaluation. To do this, she will use a journal set up specificially for IFRS adjustments.


5. Navigate to journal set

(General ledger > Setup >

Journals > Journal names).

6. Select IFRS Adj.

7. Note that the Posting layer

field is set to Operations.

8. Close the form.

For intangible asset revaluations, the difference between the revalued amoutn and the net book value is posted to a

reserve account. An equity account – 300180 (Reserve for Intangible Asset Revaluation) is already created for this demo.

Increase in asset value is to a balance sheet account, a decrease in asset value is to a P/L account.

9. Navigate to General journal

(General ledger > Journals >

General journal).

10. Select to create a new

journal – IFRS Adj.

11. Click Lines.

12. Enter the following:

a. Date: 1/31/2012

b. Account: 180140 –

001

c. Debit: 10,000.00

d. Offset account:

300180-001

13. Post the journal entry.

14. Close the infolog.

15. Close the journal forms.


16. Navigate back to the

Trial balance list page

(General ledger > Common

> Trial balance). You should

now see the adjustment

amounts just posted as the

Trial balance list page

parameters should

remember last setting. You

may need to Refresh the list

page if you had not

navigated away when doing

the journal entry.

17. Open the Parameters

form from the action pane.

18. Change the Posting

layer to Total.

19. Click Update.

20. Filter the list page to

main account 300180.

21. The system is now

displaying the complete IFRS

trial balance for this account

(Current + Operations =

Total IFRS). (The Opening

balance is the beginning

balance for the “Current”


layer in this demo.)

This demo showed, in a matter of minutes, the creation of an IFRS trial balance sheet using the Dynamics AX posting

layers in order to create financial reports that meet IFRS reporting requirements.



DEMO 4: INTERCOMPANY TRANSACTIONS AND ELIMINATIONS


Intercompany transactions are used to process transactions between companies.

Users have the ability to setup predefined elimination rules in order to create elimination transactions in a

company specified as the destination company for eliminations (i.e. elimination company). The elimination

journals can be generated during the consolidation process or using an elimination journal proposal.

Elimination transactions are required when doing consolidated financial reporting if any of the companies

being consolidated do business with each other. Some of the transactions that occur between the companies

must be eliminated. Examples include intercompany sales and intercompany purchases. The consolidated

financial reports cannot recognize revenue and expenses that occur due to business transactions that

between companies within the consolidated organization.

In this scenario, Cassie records an intercompany transaction to transfer advertising expense from the USMF

subsidiary company to DEMF company. This intercompany transaction will be eliminated during the

consolidation process.

The following demo creates a general journal entry to demonstrate how an intercompany transaction works.

Company USMF is going to transfer an advertising expense to company DEMF. The advertising expense account in

company USMF will be credited and the advertising expense account in company DEMF will be debited. Each

company will have an intercompany account that is used for the offset of the transaction to keep each company

balanced (due to/due from entries).


1. Navigate to the

General journal

(General ledger >

Journals > General

journal).

2. Select to create a

new journal – IntJrn

3. Click Lines.

4. Enter the following:

a. Date:

1/15/2012

b. Account:

601300-001-

022- -

c. Credit amount:

1,000.00


5. Click on the General

tab

6. Select Offset

company accounts

of DEMF.

7. Enter in Offset

account of 601300-

001-022 - (USMF

and DEMF use the

same chart of

accounts).

8. Post > Post

9. Microsoft

Dynamics AX will

create 2 journal

entries – one in

each company.

10. Close the

infolog.


11. Click Inquiries

> Voucher from

the Journal

voucher form.

12. Select the first

line.

13. The system

automatically

created the

Intercompany Due

from entry in

USMF.

14. A similar entry

has been created in

DEMF for the

Intercompany Due

to entry.

15. Close the

Voucher

transactions form.

16. Close the

Journal voucher

and Journal forms.

Let’s next take a look at the elimination rules.

Navigate to GLMF company for the next steps.


17. Navigate to

General ledger >

Setup > Posting >

Ledger

elimination rules.

18. Select to

create a new

elimination rule.

19. Give the rule a

name – for

example,

Intercompany

Advertising.

20. Enter GLMF as

the Destination

company. This

must be a legal

entity set up as an

elimination

company.

21. The Active

checkbox indicates

whether the

elimination rule is

available for

processing. Select

to activate this rule.

22. In the Journal

settings section,

there must be a

journal Name that

has the type equal

to elimination in

order to process

successfully. Select

ElimJrn.

Select Lines. On the lines form, you enter additional information for the elimination rule, such as the elimination


method, source and destination accounts, and dimension information.

There are 2 Elimination methods that can be selected:

Net change: Eliminates an account’s net change for a specified date range. This is the most common

elimination method.

Fixed amount: Eliminates a specified amount for an account. With this method, a manual process

determines the fixed amount to elmininate for an account.

23. Select New.

24. We will keep

the Elimination

method as Net

change for this

demo.

25. Enter the

source accounts to

eliminate. We will

enter two lines –

one for account

133300 and

another for

231300.

Additional setup can be done if necessary to specific specific dimensions to eliminate or to eliminate to specific

destination accounts.

This demo showed the setup of an elimination rule. There are 2 ways to actually create elimination journal entries.

There is the Elimination journal proposal method, which you do under General ledger > Journals > Elimination

journals from within the elimination company (such as GLMF). This method of processing an elimination rule may

be preferrred if you first must consolidate data, confirm the data in the consolidation cmopany is accurate, and then

run a separate elimination journal proposal to create, preview and validate or approve the elimination journal

entries.

Or elimination can be created during the Consolidate online process in a consolidation company that is also set up

as an elimination company. This may be preferred if consolidations are simple and the ease of a one-step process is

desirable. Demo Scenario 5 will process the elimination rules during the consolidation online process.



DEMO 5: CONSOLIDATE ONLINE


In a consolidation, you gather transactions from several sets of legal entity accounts into a single set of

legal entity accounts. You can print reports, such as financial statements, from the consolidated legal

entity. However, you cannot use the consolidated legal entity for daily transactions and only summarized

journal entries (per ledger account per day) will be created as part of this process.

You can consolidate data from legal entities that use different databases than the database for the

consolidated legal entity. This consolidation process is referred to as an import consolidation. To import

the financial results for these subsidiaries into results for a consolidated company, you must create

comma-delimited export files that contain the correct information. In an export or import consolidation,

the subsidiary legal entities are in different databases than the consolidated legal entity. The subsidiary

data is exported to files that are created automatically (if created through the export consolidation

process). Those files are then imported into the database of the consolidated legal entity.

Alternatively, online consolidation is a consolidation tool where the subsidiary legal entities are in the

same database as the consolidated legal entity.

Before you perform a consolidation at the close of a period, ensure that the period closing preparatory

activities are performed, but do not close the subsidiary accounts until the consolidation is completed.

In order for a company to be recognized as a consolidation company, a setting must be made on the

Legal entities form for the company.

1. Navigate to the Legal

entities form (General

ledger > Setup >

Organization >

Legal entities).

2. Find and select

Contoso

Entertainment

System (GLMF).

3. Note the Use for

financial

consolidation

process checkbox is

marked.

4. Consolidated financial


statements must only

include transactions

that occur between

the consolidated

entity and the other

entities outside the

consolidated group.

Because of this

requirement,

transactions between

companies being

consolidated, such as

intercompany sales or

receivables, must be

eliminated. Note the

Use for financial

elimination process

checkbox is marked

for GLMF.

5. Close the Legal

entities form.

Let’s take a look at the ledger setup for GLMF. Here you can note the chart of accounts, the fiscal calendar, the

accounting currency, an optional reporting currency, and the default exchange rate type for the consolidated

legal entity.


6. In GLMF, Navigate to

General ledger >

Setup > Ledger.

7. Close the Ledger

form.

Exchange rate types allow the setup of different exchange rates for the same from and to currency (currency

pair). Exchange rate types are available for use with consolidation to provide support for IAS 21 and FASB 52.

For example, you can use a rate type that represents the average exchange rate for the period when

consolidating P/L accounts and a rate type that represents the closing exchange rate for the period when

consolidating balance sheet accounts.

The currency translation process when consolidating DEMF into GLFM is EUR to USD.


8. Navigate to

General ledger >

Setup > Currency

> Currency

exchange rates.

9. Select Default as

the Exchange rate

type.

10. Find the

currency pair of

USD to EUR.

11. Note that the

exchange rate as

of 1/1/2012 is

81.24 (or 81.24

EUR for 100 USD).

12. Close the form.

You must set up a Conslidation systems account to automatically post differences resulting from using different

rate types for different accounts when consolidating companies into the conslidation company. In the next step,

we are setting the Posting type field to Balance for conslidation differences and selecting an equity account

as required by FASB 52.


13. Navigate to

General ledger >

Setup > Posting >

Accounts for

automatic

transactions.

14. Select the

record for Balance

account for

consolidation

difference. Put

focus in the Main

account field and

right click > View

details.

15. Select to create

a New main

account.

a. Main account:

333333

b. Name: F/X

Cumulative

Translation

c. Main account

type: Equity

d. Close the form

16. Change the Main

account selected

to the new

333333.

17. Close the form.

Let’s take a look at performing a consolidation.

Microsoft Dynamics AX 2012 R2 supports the following options to perform consolidations:

Consolidate [Export to]

o This is used when the subsidiary company is in a different database when the consolidation

company.


o Summarized general ledger data is exported from the subsidiary company to a comma-delimited

file.

Consolidate [Import from]

o This is used to perform the import to bring the subsidiary comma-delimited file data into the

consolidated company.

Consolidate [Online]

o This is used to perform the consolidation when the subsidiary company (or companies) is in the

same database as the consolidation company.

This demo will use the Consolidate [Online] functionality.

18. In GLMF,

Navigate to

General ledger >

Periodic >

Consolidate >

Consolidate

[Online].

19. On the Criteria

tab, specify a range

of main accounts to

consolidate (for

example, 110110 to

999998)

20. Select Use

consolidation

account to use the

default

consolidation

account previously

21. Select Main

account as the

Select

consolidation

account from

option.

22. Specify a date

range for

consolidation, such


as 1/1/2012 to

1/31/2012.

23. Select to

Include actual

amounts.

If using consolidation account groups and you want to consolidate using the consolidation account, set the „Select

consolidation account from‟ option to Consolidation account group and select the appropriate Consolidation

account group.

On the Financial dimensions tab, all financial dimensions defined in the system will default as lines in the grid.

Under the specification column, speciy how the financial dimensions should consolidate from the subsudiary.

Options include

None

o No financial dimension values will consolidate for the specific financial dimension

Dimension

o The specific financial dimension value of the ledger account will consolidate for the specific

financial dimension (as it was posted in the subsidiary)

Group dimension

o The financial dimension value will consolidate into the specified Group dimension value entered

for the specific financial dimension value (similar to consolidation account)

Company accounts

o The financial dimension value for the specific financial dimension will be the company account

for the specific amount (for example, USMF or DEMF). This is helpful in determine which

subsidiary company the amount originated from.

Account

o This option will display the main account fo the original subsidiary transaction. This is helpful

when consolidating from a different chart of accounts than what is used in the consolidation

company.


24. Select the

Financial

dimensions tab.

On the Legal entities tab, enter a line for each subsidiary company to be consolidated. Indicate the percentage

of ownership and whetehr the exchange differences post to a balance sheet or a profit and loss account.

Share: Indicates the percentage of the selected company accounts to be included in the consolidation. In this

scenario, USMF and DEMF are wholly owned subsidiaries of GLMF.

For the selected subsidiary company account, if the subsidary company currency differens from that of the

consolidated company, users can specify the type of account that consolidation differences are posted to:

Profit & Loss – Differences are posted to the consolidated company ledger account that is indicated for

the Profit & Loss account for consolidation differences in the Accounts for automatic transactions form

in the consolidation company.

Balance – Differences are posted to the consolidated company ledger account that is indicated for the

Balance account for consolidation differences in the Accounts for automatic transactions form in the

consolidation company.

The translation method that your organization should use depends on the relationship of the foreign

subsididary to the core business fo the consolidated legal entity. The translation method also depends on the

accounting practies of the country/region in which the consolidated legal entity is located.


25. Select the

Legal entities tab.

26. Select a new

Source legal entity

DEMF with a 100%

share and select

Balance as the

account type for

conversion

differences

27. Select a new

Source legal entity

USMF with a 100%

share and select

Balance as the

account type for

conversion

differences.

On the Description tab, optionally enter a meaningful description for the consolidation.


28. Select the

Description tab.

29. Type in

January 2012

Consolidation

On the Elimination tab, enter one or more elimination rules you want to process as part of the consolidation

function.

You can run elimination rules in a propodal mode to perform what-if analysis. This would be considered a two-

step process.

Proposal only: Elimination journals are created and can be viewed after running the consolidation process.

Post only: Elimination journals are created and posted as part of the consolidation process.


30. Select the

Elimination tab.

31. Set Proposal

options to Proposal

only.

32. Set the GL

posting date to

1/31/2012.

33. Click New in

the grid and add

Intercompany

Advertising (the

rule previously

created).

The consolidation process uses the exchange rate types defined for the range of accounts indicated if you want

to use a different exchange rate than what is set up for the consolidation company’s ledger.

You can also select the date that is used to determien the exchange rate to use: Consolidation date – the date

of the consolidation or the Transaction date, the date of the original transaction being consolidated.


34. Select the

Currency

translation tab.

35. Select a New

record in the grid

and select DEMF as

the Source legal

entity.

36. Enter a range

of accounts:

110110 to 169999

37. Select

Exchange rate type

of Default with and

Exchange rate date

of Consolidation

date

38. Enter the

remaining 3

records:

a. DEMF;

170150 –

199999;

Default;

Transaction

date

b. DEMF;

200100 –

399999;

Default;

Consolidation

date

c. DEMF;

401100 –

803200;

Average;

Consolidation


date

Consolidations can be run in batch mode or they can be processed immediately. Select OK to process the

consolidation. Since we don't have consolidation accounts mapped to all the main accounts, you will receive

messages for the accounts telling you which account it used instead. Close the infolog.

Now that the consolidation process is complete, we can review the consolidation entries that were created.

39. In GLMF,

Navigate to

General ledger >

Inquiries >

Consolidations

40. Click the

Created date and

time column twice

to sort the list

The Overview tab provides a list of all the consolidations created. In addition to the information on the

Overview tab, the General tab displays the time the consolidation record was created as well as the user ID of

the person who created the consolidation.

There may be times when it is necessary to remove conslidation transactions. For example, consolidating the

accounts of various subsidiaries can be time-consuming, and sometimes the records that were created for one

subsidiary must be revised. Instead of repeating the consolidation for all the subsidiaries, you can delete the

consolidation records that were created for a particular subsidieary and run the consolidation for just that

subsidiary again. In this case, you would click the Remove transactions button.

The Transactions button has options of Actuals or Budget. This enables the display of the journal entries

created as part of the specific consolidation record.


41. Select the

January 2012

Consolidation

record for USMF.

42. Select

Transactions >

Actuals. Here you

can see all the

summarized journal

amounts created

from the USMF

subsidiary that were

created in GLMF.

43. You can view

the transactions for

the DEMF

consolidation as

well.

A few things to note:

1. During consolidation, each subsidiary company’s accounting currency amoutn is brought over as the

transaction currency in the consolidation cmopany and is then translated to the consolidation

company’s accounting currency.

2. Posting to the cumulative translation (equity) account is to account for differences in the exchange rates

used.

3. Financial dimension segment order is per the segmentes defined on the Financial dimensions tab of the

consolidation form.

4. The consolidation process does not include the beginning balances in the consolidation company. As a

result, you will need to perform a year-end closing (Opening transactions process) in the consolidation

company and run the exchange adjustment process to adjust the beginning balances.

Next, let’s review the results of the elimination proposal that was created during the consolidation process.


44. Navigate to

General ledger >

Journals >

Elimination

45. Select the

existing journal in

the list

46. Click Lines.

47. For this demo,

you should see two

lines. One line is for

1,000 USD and the

other line is for

812.40 EUR. The

journal is balanced

in USD.

Elimination journals support workflow. If workflow was set up for this journal, Cassie could submit to Phyllis for

approval prior to posting. This demo does not have workflow set up so select Post > Post to post the

elimination journal. Close the forms.

This demo walked through using conslidation online functionality and processing an elimination rule.



CONCLUSION

These demonstrations have guided you through the capabilities of Microsoft Dynamics

AX 2012 R2 Financial Consolidations.


DISCLAIMER

© 2013 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista, Microsoft Dynamics and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. Other names and brands may be claimed as the property of others.

The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. Microsoft may make changes to specifications and product descriptions at any time, without notice.

Sample code included in this presentation is made available AS IS. THE ENTIRE RISK OF THE USE OR THE RESULTS FROM THE USE OF THIS CODE REMAINS WITH THE USER.

MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION. NO LICENSE, EXPRESS OR IMPLIED, BY ESTOPPEL OR OTHERWISE, TO ANY INTELLECTUAL PROPERTY RIGHTS IS GRANTED BY THIS PRESENTATION. Microsoft products are not intended for use in medical, life saving, or life sustaining applications.

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