Foreign Currency Revaluation in D365FO

Foreign currency revaluation feature in dynamics 365 deals with the method of translating the value of all foreign currency-denominated open accounts into the reporting currency. All  payable and receivable transactions that are due to be settled in foreign currency, expose a transaction risk, which refers to the ‘adverse impact that movements in the exchange rate could have on the companies’ books’.

These revaluations generate differences in the value of the company’s monetary assets and liabilities, which get recorded under “unrealized gains and losses”. When the transaction is settled, the differences in value between the firm sale or purchase commitment and the payment date are recorded as realized FX gains/losses on the balance sheet.

Foreign Currency revaluation in dynamics 365 can be performed on all open transactions at the ledger and sub-ledger level as depicted below.

Let’s see how it works.

Foreign Currency Revaluation for General Ledger

As part of a period-end, accounting conventions require general ledger account balances in foreign currencies to be revalued using different exchange rate types (current, historical, average, etc.).

For example, one accounting convention requires assets and liabilities to be revalued at the current exchange rate, fixed assets at the historical exchange rate, and profit and loss accounts at the monthly average. The General ledger foreign currency revaluation can be used to revalue the balance sheet and profit and loss accounts.

Navigate to General Ledger > Periodic Tasks > Foreign Currency Revaluation.

From Date and To Date: – Define the date interval for calculating the foreign currency balance that will be revalued. When you revalue profit and loss accounts, the sum of all transactions that occur within the date interval are revalued.
When you revalue balance sheet accounts, the From date is ignored. Instead, the balance to be revalued is determined by going from the beginning of the fiscal year until the To date.
Date of rate: – This date can be used to define the date for which the exchange rate should default. For example, you can revalue the balances between the date ranges of January 1 to January 31, but use the exchange rate defined for February 1.
Main account to include: – Select which main accounts to revalue: All, Balance sheet, or Profit and loss. Only main accounts marked for revaluation (on the Main account page) will be revalued. If you want to further restrict the range of main accounts, use the Records to include tab to define a range of main accounts, or individual main accounts.
Legal entity: – The revaluation process can be run for one or more legal entities. The lookup will display only the legal entities to which you have access. Select the legal entities for which you want to run the revaluation process.
Currency to revalue: – The revaluation can be run for one or more foreign currencies. The lookup will include all currencies that were posted within the date range relevant for the type of main account (Balance sheet or Profit and loss), for the legal entities selected to revalue. The accounting currency will be included in the list, but nothing will be revalued if the accounting currency is selected.
Preview before posting: – Set Preview before posting to Yes if you would like to review the result of the General ledger revaluation. The results of the preview can be exported to Microsoft Excel to retain the history of how the amounts were calculated.
From the preview, the user has the option to post the results of all legal entities using the Post button. If there’s an issue with the results for a legal entity, the user also has the option to post a subset of the legal entities using the Select legal entities to post button.

After the foreign currency revaluation process is complete, a record will be created to track the history of each run. A separate record will be created for each legal entity and posting layer.

Unrealized gain / loss transactions will be created in General Ledger.

For example, the following balances exist for main account 110110.

Date	Ledger account	Transaction amount	Accounting amount
January 20	110110 (Cash)	500 EUR (Debit)	1000 USD (Debit)

The main account is revalued on January 31. The unrealized gain/loss is calculated as follows.

Current balance in transaction currency	Current balance in accounting currency	Exchange rate at the time of revaluation	New accounting currency amount	Unrealized gain/loss
500 EUR	1000 USD	1.666667	833.33 EUR (500 x 1.666667)	166.67 loss (833.33 – 1000)

The following accounting entry will be created.

Date	Ledger account	Debit	Credit
January 31	110110 (Cash)		166.67
January 31	801400 (Unrealized loss)	166.67

Now assume; no new transactions are posted for the month of February and the main account is revalued again on February 28.

Current balance in transaction currency	Current balance in accounting currency	Exchange rate at the time of revaluation	New accounting currency amount	Unrealized gain/loss
500 EUR	833.33 USD (1000 – 166.67)	2.5000000	1250 USD (500 x 2.5)	416.67 gain (1250 – 833.33)

The following accounting entry will be created.

Date	Ledger account	Debit	Credit
February 28	110110 (Cash)	416.67
February 28	801600 (Unrealized gain)		416.67

Once the revaluation is completed; system will show the voucher as per below.

In continuation with this, in a later post, we’ll look into how we can do the revaluation for the sub ledgers, that is Open AR / AP / Bank Transactions.
Thanks!