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Creating expense reports in a currency that is different than the legal entity

  • 1.  Creating expense reports in a currency that is different than the legal entity

    GOLD CONTRIBUTOR
    Posted Nov 27, 2018 04:09 PM
    Hi,

    Does anyone know if it is possible to create an expense report in a currency other than the default legal entity currency?

    The scenario is that there are European users that need to be reimbursed in EUR, but the legal entity currency is CAD.

    This is preferred to a clumsy workaround involving "converting" the CAD vendor invoice to a EUR vendor invoice.

    Thanks!

    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------


  • 2.  RE: Creating expense reports in a currency that is different than the legal entity

    SILVER CONTRIBUTOR
    Posted Nov 28, 2018 10:11 AM
    Where are you creating the expense report?  In an AP Invoice journal?  If so, you can change the currency on the line level of the AP Invoice journal.  Also, you can set the default currency at the vendor level so you do not have to change it each time you invoice the vendor.  If it is an intercompany transaction make sure to have your currencies set up in each company and your intercompany accounting is set up in each company as well.

    ------------------------------
    MARY LYNN KINCHEN
    Sr Systems Analyst
    SNF HOLDING COMPANY
    ------------------------------



  • 3.  RE: Creating expense reports in a currency that is different than the legal entity

    SILVER CONTRIBUTOR
    Posted Nov 29, 2018 06:37 PM
    Great topic! I have a few customers I'm talking to that have differing opinions on how we need to better handle currency in expense reports. I'd love a few additional opinions.

    Today we pay in company currency for manual (no company credit card), or else in credit card currency if using a corporate managed card integrated into F&O.

    I have multiple customers asking to instead pay in the form of the currency that the expense was entered (transaction currency). One of the folks I talked to in this camp firmly believes that we shouldn't look at currency on the vendor.

    I have a smaller set of customers who have the same ask as you. That expense should just look to the currency on the vendor and pay based on that currency. Below is a table of how things are handled today as of 7.2 + hotfix and newer.

    I'm happy to schedule some calls if you'd like to talk in more detail.

    Credit card currency

    Credit card transaction currency / Local currency

    Company currency /Accounting currency

    Expenses card / expenses form

    Itemizations

    Distributions

    Voucher transactions

    Vendor transactions

    USD

    BRL

    USD

    BRL

    BRL

    BRL

    Debit BRL Credit BRL

    USD

    NA (Manual expense)

    BRL

    USD

    BRL

    BRL

    BRL

    Debit: BRL Credit BRL

    USD

    CHF

    CHF

    USD

    CHF

    CHF

    CHF

    Debit: CHF Credit: CHF

    CHF

    CHF

    USD

    USD

    USD

    USD

    USD

    Debit: USD Credit: USD

    CHF

    EUR

    CZK

    HUF

    CZK

    CZK

    CZK

    Debit: CZK Credit: CZK

    EUR

    USD

    USD

    USD

    USD

    USD

    USD

    Debit: USD Credit: USD

    USD



    ------------------------------
    Ryan Sandness
    Senior Program Manager Ryan.Sandness@microsoft.com
    ------------------------------



  • 4.  RE: Creating expense reports in a currency that is different than the legal entity

    GOLD CONTRIBUTOR
    Posted Dec 21, 2018 07:15 PM
    Hi Ryan,

    Apologies for the late reply, but stabilization has been hectic.

    For us, the currency preference for Employee reimbursed (i.e. manual or non-company credit card) expense reports would be:

    1) Company Currency defaults, but can be changed on the expense report as this will allow for ultimately flexibility for those truly globetrotting employees who work and live in multiple countries. Totally understand that practically, this comes with lots of process risks, so probably not realistic.

    2) Currency is defined by the vendor account assigned at the worker/employee - I think this is a good compromise as most employees will likely be reimbursed in a single currency. There may be scenarios where a particular globe trotting employee may want multiple currencies, but I'd imagine that's not the norm and you could work around those scenarios. I would also suggest that it would be preferable to have this ability override the existing logic whereby the company currency is the default payment currency. This will allow the selection of which employees can be reimbursed in their vendor currency as opposed to having to manage all employees repayments through their vendor currency.

    In the case of customers looking to reimburse employees based on the transaction currency, does this camp have a unique operating scenario? Is this for globetrotting employees who live in multiple countries?

    I think the most common scenario is that a Country 1 salesperson is flying to Country 2 and incurring Country 2 expenses. That person would want to be reimbursed in his Company 1 currency. It doesn't make much sense to force paying him in Country 2 currency as he will have no use for that. Unless, I am totally misunderstanding what they are indicating.

    Feel free to reach out to me if you have further comments or questions..







    ------------------------------
    Christopher Ho Yee
    MEC (Mountain Equipment Co-op)
    Richmond BC
    ------------------------------



  • 5.  RE: Creating expense reports in a currency that is different than the legal entity

    TOP CONTRIBUTOR
    Posted Dec 31, 2018 02:14 AM
    @Chris Ho I am just seeing now your response. when you say the employee is paid in their own country currency - are you happy to just record the payment in their own country currency (in which case, this is doable today, by running the payment proposal using that currency) or do you want to also record ​the balances ("invoices") in the employee's currency?

    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 6.  RE: Creating expense reports in a currency that is different than the legal entity

    TOP CONTRIBUTOR
    Posted Dec 31, 2018 02:07 AM
    Hi @Ryan Sandness

    I am ​glad you joined the conversation.
    After thinking about what Chris has asked and what you have commented, I think both of you identified 2 separate (but a little bit related) design deficiencies of how the expense module is working and recording transaction.

    First - Chris point. @Chris Ho - let me know if I understood your issue correctly....
    Expense module records all liabilities in the currency in which they have been incurred - but this is incorrect.
    If a TRADE VENDOR invoices a company in foreign currency (let's say, GBP) - they expect to be paid (in most cases) in GBP, and are happy to keep the "balance" (the liability) in that currency.
    If you pay them in a month or 3 months - they expect to pay in GBP or if they are paid in USD, they will be happy to receive the amount that GBP balance will be worth in USD at the time of payment - so it makes sense to keep the liability in GBP.

    On the other hand, when employee incur expenses in one currency, but reimbursed in another currency (say for example, the expense in GBP, but the employee is reimbursed in EUR) - this employee incurred these expenses from their own pocket (assuming in EUR) - if the GBP exchange rate "crashes" between the time they had the expense to the time they are paid - it is "not their problem" - they want to be reimbursed per how much they spent when they had the expense.
    In the current design, the expense module records all expenses as "foreign currency" invoices until they are reimbursed, just like they were "trade invoices" - so the employee will be reimbursed, when you do a "payment run" for these expenses, per the exchange rate in effect when you make the payment - this is not what employees want (or what makes sense).
    Hence - I think the right way is for the Expense Module to allow you to select an "expense report currency" and once the expenses are recorded, to automatically covert them into that currency - that way you would be able to pay the employee exactly what they spent, and not the random amount it will be worth at the time of reimbursement.






    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 7.  RE: Creating expense reports in a currency that is different than the legal entity

    GOLD CONTRIBUTOR
    Posted Nov 28, 2018 12:23 PM
    Edited by Christopher Ho Yee Nov 29, 2018 01:22 AM
    Hi Mary,

    Thank for your reply.

    We are processing expense reports through the Expense management module not through A/P invoices.

    That is an approach, but the preference is not to have a process that is that different just for employees that need to reimbursed in a different currency.

    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------



  • 8.  RE: Creating expense reports in a currency that is different than the legal entity

    TOP CONTRIBUTOR
    Posted Nov 29, 2018 02:38 AM
    I might be missing something in your question or there is something basic I forgot about the Expense Management module.

    Where do you see that an expense report has a "currency" which is the accounting currency of the company?

    The way I understand it, when recording an expense report, each expense line is recorded in the currency in which it was incurred.
    So if your EU employee rented a car for CAD200, and stayed in a hotel for USD300, the expense report will have 2 lines, one in CAD and one in USD.

    This line will post with debit to the expense account (say, "Travel Expense"), and credit to the employee "vendor", to record the liability or "invoice" to the employee.
    So far this is OK, and you don't want to change that - since you are required to record an expense in the expense's original currency.

    Now, when it is time to re-imburse the employee (create payment journal), the currency used to settle these "invoices" is left for your discretion.

    So in this case, you create an AP payment journal, and you can either manually select the vendor, currency as "EUR", and select the invoices to settle - just like you would have done if you were paying a trade vendor in a currency different than the invoice currency (rare, but it does happen).
    You can also automate this by executing Payment Proposal process, while selecting "EUR" as the payment currency - so the resulting payments to all the invoices selected are going to be created in EUR.

    Is that what you are trying to accomplish?



    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 9.  RE: Creating expense reports in a currency that is different than the legal entity

    GOLD CONTRIBUTOR
    Posted Nov 29, 2018 07:36 PM
    Hi Zvika,

    Good to hear from you. Thanks for the input! Newbie to expense management, so I'm not familiar with options...yet.

    Not quite. We're looking for the option to being able to define reimbursement currency for a given expense report. In our situation, regardless of which currencies are incurred on the transactions, we'd like to create the Employee vendor liability in a currency other than the legal entity default (in EUR as opposed to CAD).

    Although I haven't tried your approach, I would be concerned about the impact on the unrealized exchange when the G/L FX revaluation of the A/P is run. If the liability is created in CAD and then relieved in EUR, I believe the system will continue to revalue the EUR payment forever as this is essentially an open, albeit -ve, EUR balance in the A/P Control general ledger account.

    An alternative approach that we have discussed is to create the Invoice in CAD, credit it out of CAD and then put it back in in EUR through a clearing account and then pay. Clunky, but would work.


    ------------------------------
    Christopher Ho Yee
    Altius Consulting
    Richmond BC
    ------------------------------



  • 10.  RE: Creating expense reports in a currency that is different than the legal entity

    TOP CONTRIBUTOR
    Posted Nov 30, 2018 07:13 AM
    Edited by Zvika Rimalt Nov 30, 2018 07:23 AM
    Thanks Chris for clarifying your question. I have not touched Expense Management module for a while and thought I might be forgetting things.

    First, clarification - we both on the same page where the expense report's liabilities are recorded not in Accounting Currency (-company's currency) but in transaction currency (=expense currency)
    In your case, these 2 might be one and the same, but I doubt it will always be that way.

    So to your original question - I don't think there is a straight forward functionality that would convert all these liabilities into a 3rd currency.

    Can you elaborate what is the business reason/requirement around wanting to record the liabilities in EUR?
    I am not an accountant, but I seriously doubt a company can just randomly pick a currency for recording their liabilities without it being backed up by some kind of hedging etc - so I am curious to the reason this is something you were trying to do.

    In addition, how big are these liabilities? are they significant enough to make it a material to revalue them in EUR rather than revalue them in the transaction currency? big enough to justify the cost of a work around?

    To your concern about balances not getting closed and keeping getting revalued indefinitely: this will not happen if you (correctly) use the AP (and AR) module's functionality for Foreign Currency Revaluation.
    That functionality will only revalue open AP balances - no matter what currency they are in.

    If you incorrectly try to use the Foreign Currency Revaluation functionality in the GL module to revalue your control accounts for AP and AR you will indeed get the problem you describe - which is exactly why you must never use the GL functionality to revalue AP and AR ledger control accounts - one of the several booby traps Microsoft has left hanging around.

    To your suggested work around: posting the credit side of all expenses into a clearing account, and  then clearing it manually, in EUR into the vendor account. When I think about this solution I believe I see a problem.
    That clearing account needs to be a B/S account, right? if so, looks like you'll be stuck with those "never stopping" revaluations for EUR amounts?
    I am also not sure how you can get to correctly record realized FrX gain/loss when you do it that way, ,  unless you clear each transaction based on the historical exchange rate at the time of recording the expense, and clear the remainder manually .




    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 11.  RE: Creating expense reports in a currency that is different than the legal entity

    GOLD CONTRIBUTOR
    Posted Dec 21, 2018 07:48 PM
    Hi Zvika,

    Thanks for the comments!

    The liabilities need to be recorded in EUR as these are EUR liabilities. The salespeople work and live in the EU. They incur expenses in EUR. We need to reimburse them in EUR even though they work in the CAD company.

    The use of a clearing account will be OK as the balance is 0 and currency revaluation on that account is intentionally turned off, regardless of a B/S or P&L account.

    ------------------------------
    Christopher Ho Yee
    MEC (Mountain Equipment Co-op)
    Richmond BC
    ------------------------------



  • 12.  RE: Creating expense reports in a currency that is different than the legal entity

    TOP CONTRIBUTOR
    Posted Dec 22, 2018 07:39 PM
    If the expenses are incurred in EUR, so out of the box all the liabilities are also recorded in EUR, no? what do you need to convert in that case?

    ------------------------------
    Zvika Rimalt
    Functional Consultant
    Vancouver BC
    ------------------------------



  • 13.  RE: Creating expense reports in a currency that is different than the legal entity

    SILVER CONTRIBUTOR
    Posted Dec 26, 2018 09:20 AM
    Hi Christopher,
    I haven't used the Expense Management module but the same logic should apply to all modules.  The expense can be recorded in any currency you select.  Our salesmen travel all over the globe and have several different currencies(CAD, EUR, YEN, etc) for one report.  We record the expense in the currency incurred and reimburse them in USD.  When the payment journal is created you can select the currency to pay them in, regardless of the original recording currency.  Depending on how often your FX rates are updated will drive the FX gain/loss.

    When we print subledger reports the expenses are shown in the original currency(CAD, EUR, YEN, etc) and in USD.  Only the USD values are shown on financial statements.  I am confused on what exactly you are trying to accomplish.

    ------------------------------
    MARY LYNN KINCHEN
    Sr Systems Analyst
    SNF HOLDING COMPANY
    ------------------------------



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