Consolidating Financial Data in Microsoft Dynamics NAV
With roots that go back to Denmark in the 1980s, Microsoft Dynamics NAV offers strong multinational and complex accounting capabilities—including the ability to handle consolidations—that other ERP solutions do not.
Some organizations need to consolidate financial data for multiple business units or legal entities, while others have subsidiaries that report to the parent organization. In either case, Dynamics NAV has tools to make those processes faster and easier. Following are tips for handling consolidations in either product:
What Dynamics NAV does when it comes to consolidations
When companies need to begin consolidating subsidiaries for financial reporting, there are often misconceptions of how the consolidations process works Dynamics NAV. Here is a list of what NAV allows you to do:
- Map different Charts of Account and Dimension structures from the subsidiary companies to the master Consolidation company
- Identify the ownership percentage for a subsidiary and automatically applies this percentage to the consolidated financial data
- Consolidate financial data from subsidiary companies within the same Dynamics NAV database
- Consolidate financial data using a file created from another Dynamics NAV database (or any other financial software capable of producing the required file format)
- Establish a G/L Entry in the Consolidation company for the net change in the mapped G/L Account(s) balance for the consolidation period for each subsidiary
- If desired, bring forward the related Dimension detail for the net change G/L Entry that is established
- Consolidate foreign currency subsidiaries in accordance with standards set in FAS 52-Foreign Currency Translation
- Re-consolidate past periods if G/L balances in a subsidiary company have changed
- Do financial reporting at both the consolidated and subsidiary level from the Consolidation company
Multiple Consolidation Translation Methods And When They’re Used
- Average Rate (Manual). Typically used for Income Statement accounts; the rate is specified during consolidation process
- Closing Rate. Typically used for Balance Sheet Accounts, with the exception of Equity accounts; the rate is specified during consolidation process; the beginning balance is restated.
- Historical Rate. Typically used for Retained Earnings, Intercompany Payables and Receivables, foreign currency loans from third parties; use the exchange rate in effect on the transaction’s posting date.
- Composite Rate. Used for Equity accounts. The beginning balance is not restated; the average rate specified during consolidation is used for the current period; indicate accounts for posting on the Business Unit page.
- Equity Rate. Similar to Composite; indicate accounts for posting on the Business Unit page.
NOTE: Methods should agree with those being used currently (manually) and confirmed through testing and with outside auditors.
Tips for Consolidations using Dynamics NAV
What do I need to do when adding a new G/L account? Complete the Consol. Debit Account, Consol. Credit Account, and Consolidation Translation Method fields.
How do I select Dimensions for consolidation? From the Business Unit, select Functions > Import Database. On the Options tab, click the ellipsis in the Dimensions field. Place a check in front of the dimensions to import.
How do I record eliminating entries? Enter the eliminating entries in a journal batch. To view all entries prior to posting, run the Eliminations report from the Business Unit page. On the Options tab, select the Journal and Batch for the elimination entries.
Do I need to close the year in the consolidated company? The year must be closed to properly reflect retained earnings and the income statement balances.
What are the steps involved in processing a consolidation for multicurrency? From the Business Unit:
- Click the Exchange Rates button > Average Rate and enter the average exchange rate for the period.
- Click the Exchange Rates button > Closing Rate and enter the closing exchange rate for the period.
- Process as normal for other consolidations
What exchange rate is used for processing a consolidation? In the Currency Exchange Rate Table, you can select the option to use the Local (Parent) or Business Unit (Subsidiary) as the source; alternatively, you can enter the exchange rates from the business unit card.
Are there special considerations when reconsolidating with multiple currencies? Yes. Enter the Average Rate and Closing Rate on the Business Unit card.
Can I use an Additional Reporting Currency for consolidations? Yes. In the Data Source field on the Business Unit card, select the Additional Reporting Currency option.
Do I need to run the Adjust Exchange Rate batch in the consolidated company? If you use the Additional Reporting Currency (ACY) as the consolidation currency, you need to run the Adjust Exchange Rate batch job in the consolidated company for the ACY. If you use multiple currencies in any of the subsidiary companies, you need to run the Adjust Exchange Rate Batch job for your customers, vendors, and bank accounts prior to consolidating.
What Dynamics NAV does not do
Although Dynamics NAV is well equipped for consolidations, there are some things it was not designed to do:
- Establish detailed G/L Entries from the subsidiary’s daily transactions in the Consolidation company
- Bring forward posted sub-ledger detail from the subsidiary company (e.g., Customer Ledger, Vendor Ledger, Bank Account Ledger, etc.)
- Establish Posted Documents from the subsidiary in the Consolidation company
- Establish G/L Budgets in the Consolidation company
- Automatically identify or process Elimination entries
However, what Dynamics NAV offers is well-suited to many organizational requirements.
Need Help With Consolidations? Ask The Experts
At ArcherPoint, our accounting and finance experts have years of experience helping companies make it easier to manage multiple legal entities, subsidiaries, or business units, both within the US and multi-nationally. Contact us for help with setting up your consolidations process.
Learn about Consolidations in Dynamics 365 Business Central.