Currency and Exchange Rate Setup in MS Dynamics Ax 2012

The first and the most important setup in Microsoft Dynamics AX® is Currency setup. The setup is a mandatory step in Microsoft Dynamics AX®. 

If the organization is dealing with different currencies, then multi-currency functionality may be used. Further if the organization has multiple legal entities and the transactions occur in multiple currencies, then maintaining currencies and their corresponding exchange rate becomes essential. So to deal with this one has to use the multi-currency functionality.

How to setup Currency in MS Dynamics Ax 2012?

In Microsoft Dynamics AX, a list of currencies is provided by default. The currencies are loaded the first time a user opens the General ledger parameters form.

To go to currency list form, click General ledger, click Setup, click Currency, and then click Currencies.

You can set the currency code as per the requirement. Further if you want to set the currency symbol like ₹ (Rupee symbol), first of all change the Current Currency Setting in the regional setting.

How to change the Regional Setting?

§  Go to the Control Panel of windows

§  Select Region and Language

§  In the Format Tab select English(India)

§  Click on the Additional Setting button

You can copy the symbol from here and paste it on the Symbol Field of MSD Ax 2012.

The check box Reference currency for triangulation is used to mark a Currency as Triangulation Currency.

What is Triangulation Currency?

It is to handle countries in the EU where the conversion to the EURO is being undertaken whilst the national currency is phased out. Basically the triangulation rule is that you have to convert from one participating currency to another, you must convert via the euro and round the euro amount to not less than three decimal places. So rather than a 1:1 currency it goes through the EURO. So say for example Euro convert to the secondary currency and then convert to the based currency, Euro X 2nd currency X based currency.

By default, the EUR currency is selected as the Triangulation currency. Only one currency can represent the Triangulation currency. To change the Triangulation currency, first clear the Reference currency for triangulation check box on the EUR record in the Currencies form. Then select the Reference currency for triangulation on the desired currency.

Microsoft Dynamics AX 2012 uses the concept of Accounting currency and Reporting currency.

§  Accounting Currency: In previous releases of Microsoft Dynamics AX, this was called the company currency. The customary monetary unit of measure used to record the converted monetary value of economic transactions in ledger accounts.

§  Reporting Currency: This is the monetary unit of measure used for reporting and financial accounting purposes. The monetary unit of measure used to record the converted monetary value of economic transactions in ledger accounts for financial and management reporting purposes.

Say for example if the accounting currency is in Rupee and reporting currency is in USD then based on the exchange rate the accounting transactions are booked with converted amount with USD.

How to enable a Currency for Currency Conversion?

The Currency Converter setup allows numeric conversions for online transactions. If the Conversion checkbox is selected, the system will automatically convert transaction amounts in grids using the exchange rates in the lower pane.

This setup allows the display of financial information in a currency other than the default accounting currency in forms and reports. This conversion is completed by double-clicking the Currency converter in the Status bar in these forms.

Perform the following steps to convert to another currency.

After the Currency sign provide a space before so as to separate the symbol and the amount.

Enter the date used for the conversion in the Date of rate field, eg. 22-01-2013.Then, click a currency to select the new currency. The Currency converter form will automatically close and the Currency field on the status bar displays the new currency.

But remember that exchange rates for the two currencies for the specified date or date range must exist in the system.

All the forms, inquiries, and reports that originally displayed amounts in the accounting currency now display the currency selected.

If you want to reset the currency to its default accounting currency, then open the Currency converter form. Click the Reset button to return to the ledger accounting currency.

How to set Rounding Options?

Select a currency. In the Rounding Rules section, Round the sums according to a fixed unit, for general transaction amounts. For example, amounts on transactions are rounded to the nearest unit to 0.01. Specify the general unit for rounding in the General round-off field.

Also, Round sums for Sales orders, Purchase orders, and Prices.

For Rounding Method, select the rounding convention that applies to the number to the right of the round-off unit that is entered in the Rounding rule text box.

There are three options in the Rounding Method dropdown, these are:-

Normal – round up numbers 5 and higher and round down numbers 4 and lower. These means if the number ends with 0, 1, 2, 3, or 4 then the last digit will be 0, and if the number is more than 4 then the last digit will be increased by one.

Say for example if the rounding off is 0.01 and the number is 0.004 then it will be converted to 0.01 and if the number is 0.007 then it will become 0.01.

Downward – This will round down all numbers, whatever the condition is there, so if we refer the above example then the number will be converted to 0.00 in the both cases.

Rounding-up – This will round up all numbers, whatever the condition is there, so if we refer the above example then the number will be converted to 0.01 in the both cases.

How to use the Currency Gender option?

The Currency Gender is used for Spanish speaking countries to define the gender printed on checks and reports. By default the value for this field is Masculine. So if you are dealing with the Spanish branch or something like that, then use the option.

Rounding Option Considerations

All posting amounts are rounded off to the nearest factor of the specified unit, regardless of whether they are calculated and posted automatically or entered manually by the user.

Also in the General ledger parameters form, the following must be done:

1. Specify the maximum rounding amount for a voucher in the default currency, in the Maximum penny difference field.

2. Set up the rounding for secondary currencies in the Maximum penny-rounding in secondary currency field, as shown below.

Exchange Rates

Different sets of Exchange rates could be segregated into different Exchange Rate types. So, different exchange rate types could be used for different purpose.

How to Create Exchange Rate Types?

The exchange rates types are used entire system. These data types are needed to be setup once. Exchange rate types are a grouping that allows different exchange rates for two currencies. These exchange rates are used to convert the transactions like purchase, Sell, etc.

To setup the exchange rate, go to the General ledger, click Setup, click Currency, and then click Exchange rate types. Then click on the New button to create a new exchange rate type. Type an ID for the exchange rate type in the Exchange rate type field and a description in the Name field. Close the form.

How to Create Currency Exchange Rates?

To create currency exchange rates, select the Currency Exchange rates form, click General ledger, click Setup, click Currency, and then click Currency exchange rates or you can navigate from the Exchange rate type form. Select an Exchange rate type from the drop-down list. Click the New button. Provide the necessary exchange rates between a currency pair by selecting a currency in the From currency and the To currency drop-down list.

Provide the Quotation unit say 1. Typically the system is based on either one unit or one hundred units. If the field is set to one hundred units, the exchange rate should specify the equivalent of one hundred units of the foreign currency. For example, if the "From" currency is Rupee and the "To" currency is USD, then the exchange rate should specify how many Rupees equal one hundred USD.

Select a date range in by entering the From date and a To Date in the appropriate fields. This date range is used to filter the display of the exchange rates in the grid. By default, this range is set to 30 days prior to and 30 days after the current date.

It is possible to add multiple exchange rate dates for a single currency pair by clicking the Add button. It is also possible to remove exchange rate dates for a single currency pair by clicking the Remove button.

How to create Revaluation Accounts?

Since the rate of exchange is dynamic. Thus changes or fluctuation in rates of exchange occurs very often. When running currency revaluation, exchange rate differences may occur due to the change in exchange rates. This is also used in the customer/vendor settlement of payments and invoices. Revaluation processes will generate unrealized gain/loss amounts where the settlement process will generate realized gain/loss amounts.

For each ledger, define main accounts to account for changes in exchange rate loss or gain.

To set up ledger and currency specific exchange rate loss/gain accounts, select General ledger, select Setup, select Currency, and then select Currency revaluation accounts. Then select the ledger in the Ledger field. As shown below.

Select a Currency (eg. USD) and define the main accounts that will be posted to for unrealized and realized gains/losses for the currency in that ledger. Repeat same steps for each currency.