Description of how the Adjust Exchange Rates process affects posted entries that are beyond the specified date range when you run the Adjust Exchange Rates batch job in Microsoft Dynamics NAV


Microsoft Business Solutions-Navision 4.0 and Microsoft Navision 4.0 are now part of Microsoft Dynamics NAV 4.0. All references to Microsoft Business Solutions-Navision or to Microsoft Navision 4.0 relate to Microsoft Dynamics NAV.

INTRODUCTION


This article describes how the Adjust Exchange Rates process affects posted entries that are beyond the specified date range when you run the Adjust Exchange Rates batch job in Microsoft Dynamics NAV.

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The Adjust Exchange Rates process revalues the posted entries

When you run the Adjust Exchange Rates batch job in Microsoft Dynamics NAV, the Adjust Exchange Rates process revalues the posted entries that are beyond the specified date range of the batch job. These posted entries may also be closed. If they are closed, the closing date is derived from the current period payment application.

Conditions under which the Adjust Exchange Rates process may automatically record posted entries that are beyond the specified date range

In the Adjust Exchange Rates process, you can configure the backdated revaluation of the currency by setting a historical period date range. However, the Adjust Exchange Rates process may automatically record posted entries that are beyond the specified date range if the following conditions are true:
  • The date range includes the original invoice.
  • The date range excludes an applied payment that was made at a later date.

Why you have to reverse the unrealized gain or the unrealized loss during the Adjust Exchange Rates process

If you apply payment entries against invoice transactions, you must reverse the unrealized gain or the unrealized loss that is posted during the Adjust Exchange Rates process. You must reverse the unrealized gain or the unrealized loss on the date that the payment was posted. You must do this so that the Adjust Exchange Rates process does not overstate the currency gains and the currency losses. For example, consider the following scenario:
  • You post a foreign currency invoice in March 2007.
  • You post a foreign currency payment against the invoice in May 2007.
  • You run the Adjust Exchange Rates batch job for the period ending March 2007.
In this scenario, a realized gain or a realized loss is generated because the invoice amount and the payment amount may be different. These amounts may be different because the exchange rate that was in effect on the date of the invoice may be different from the exchange rate that was in effect on the date that you applied the payment. Notice that this realized gain or realized loss is posted in May 2007 because you applied the foreign currency payment in May.

Additionally, consider a situation in which the final financial reporting was not completed for the period ending March 31, 2007. The adjustment of the foreign currency balances to the latest exchange rate must occur on March 31, 2007. This must occur on March 31, 2007, so that the following amounts are reflected in the final financial reporting:
  • The correct balance sheet amount for accounts receivable balances in foreign currency
  • The correct balance sheet amount for accounts payable balances in foreign currency
Therefore, you must complete the currency adjustment for all the open documents by March 31, 2007. When you run the Adjust Exchange Rates batch job for the period ending March 31, 2007, you can set a date filter that contains an ending date of March 31, 2007, and a posting date of March 31, 2007.

Note If you use this date range, the posting date of May 2007 for the posted payment is excluded from consideration. The posted invoice is treated as an open transaction. The posted invoice is open for revaluation as of March 31, 2007.

When you run the Adjust Exchange Rates batch job on March 31, 2007, Microsoft Dynamics NAV posts an unrealized gain or an unrealized loss on the same date. This unrealized gain or unrealized loss is posted for the revaluation of the invoice value. The revaluation is based on the latest exchange rate. An entry is posted on the payment date in May 2007 for the reversal of the unrealized gain or of the unrealized loss. This entry is correct because the invoice posting transaction and the payment posting transaction are linked. This also creates a precedent for backdating the foreign exchange gain entries and the foreign exchange loss entries. Therefore, the revaluation of the Adjust Exchange Rates process should consider the future payment entries to avoid overstating the foreign currency gains and the foreign currency losses.

The Adjust Exchange Rates process is an irreversible process

The Adjust Exchange Rates process is an irreversible process. If an error occurs after the batch job is run, you cannot change any of the entries that were revalued. You cannot change these entries because the Adjust Exchange Rates process updates all the relevant tables. These tables refer to detailed customer ledger entries, to detailed vendor ledger entries, to bank ledger entries, and to general ledger entries. Additionally, processed entries cannot be amended by using journals.

If the wrong result occurs after you run the Adjust Exchange Rates process, the best resolution is to revert to a backup. You should only perform currency revaluations after you carefully analyze the entries that will be affected by the revaluation. Before the currency revaluation is finished, you are strongly advised to make a backup so that you can revert to the original currency valuations if you have to.