Armanino Blog
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Multicurrency Consolidations & Setup in Microsoft Dynamics GP

August 25, 2009

With the globalization of the world's economy, a lot of companies are venturing into international markets. This can be great for business but tough on the finance department. They have to worry about foreign currency markets, deciding on daily versus monthly exchange rates, deciding on a source for exchange rates, figuring out which GL accounts should revalue, which shouldn't revalue, FASB 52 and more. This can make it very difficult to perform your monthly consolidations. The first step most companies will do is start doing all their foreign currency translation calculations offline in Excel. They look up the exchange rates manually, figure out what the monthly average rate should be for their P&L, and calculate the CTA adjustment. The problem here is that now you have financial data outside your financial system and you're using Excel as your financial reporting software instead of FRx. So the question becomes, how can I get Microsoft Dynamics GP to do all this for me?

FRx will do multicurrency consolidations and calculate your CTA amount but there are a few catches. First off, FRx calculates your CTA amount, as the difference left over from converting your Balance Sheet accounts at the Month End rate, and your P&L accounts at the average rate. This basically causes your Balance Sheet to not balance. FRx puts the difference into the CTA line on the Balance Sheet and that is your calculation. If you are familiar with FRx, you know that a missing account can also cause your Balance Sheet to be out of balance. Now it becomes much more difficult to tell if you are missing an account or if it is all part of your CTA adjustment. The second problem with FRx doing it this way is that the CTA adjustment does not exist anywhere in GP. So if your FRx reports get damaged or lost, or if someone accidentally changes your exchange rates, it could change all of your past financial reports.

The most effective way I've seen consolidations done in Microsoft Dynamics GP is to have a separate GP Consolidation Company and have a segment in the GL that refers to the specific legal entity. This allows you to still have your consolidating financial reports printed out of FRx. There are a couple 3rd party products that will do the actual consolidation and they all have their strengths and weaknesses based on how many companies you're consolidating, what you're company ownership structure is, and how strict your SOX requirements are. In some cases, we've even done some custom solutions that do all the consolidation and translation.

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