Foreign Currency Revaluation in Dynamics AX 2012

I tried to run through this process in Dynamics AX 2012 R2 and following was the process and related findings.

1. First I setup all the accounts namely:
1. Unrealized Profit (Asset)
2. Unrealized Loss (Liability)
3. Realized Profit (Revenue)
4. Realized Loss (Expense)
2. Then I created a foreign currency in the system and also entered the exchange rates for the same for few days.

I basically wanted to see when these accounts are hit when the transactions related to foreign currency are posted. I did post two type of transactions namely:

• One without using the Unrealized Profit/Loss accounts
• One with Unrealized Profit/Loss accounts

Now what does this mean. This means that I tried the foreign currency transactions one with Foreign Currency Revaluation Process and one without Foreign Currency Revaluation Process.

For the transactions where I did NOT ran the foreign currency revaluation process, the Realized Profit / Loss accounts were direct hit. for e.g.:

I posted an AP Invoice journal in foreign currency. Then immediately after that I posted the AP Payment journal for the same, but on a different date with different exchange rate. This time the transaction was posted but directly hitting the Realized Profit and Loss accounts.

Then I tried to change the process a bit, by introducing the Foreign Currency Revaluation process in it. This time I posted an AP Invoice Journal and then I ran the Foreign Currency Revaluation process for a different date with different exchange rate. The posting that happened this time hit the Unrealized Profit / Loss accounts. Accordingly they also hit the control accounts (Trade Creditors in case of Vendor Account and Trade Debtors in case of Customer account). After this I posted the AP payment journal. After the payment journal was posted, it hit the Realized Profit / Loss account and at the same time reversed the entries in the Unrealized Profit/Loss account.

So the conclusion is the entries registered in the Unrealized Profit  / Loss accounts are nothing but a provision to accommodate the fluctuating exchange rate. This also makes the Balance sheet more accurate, as you have made a provision for the potential profit and loss that may or may not occur in future due to change in exchange rate.

It is not mandatory to use the Unrealized Profit / Loss accounts on a monthly basis during the monthly closing. Some companies only use Realized Profit / Loss accounts for the entire year and at the end of the year they will run the Foreign Currency Revaluation to make provision for the unrealized profit and loss.

Hope this was useful enough. Till next time happy exploring new things in AX.

Thanks!

AXAPTAMANIAC