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About consolidation translation methods

Dynamics AX 4.0

A translation method is an accounting convention that:

  • Determines how the accounts of a foreign subsidiary are transferred to a consolidated company.

  • Determines the exchange rate that applies to data coming into various kinds of consolidated company ledger accounts.

The appropriate translation method depends on how the foreign subsidiary is related to the core business of the consolidated company. It also depends on the accounting practices of the country/region in which the consolidated company is located.

A foreign subsidiary can be an integrated part of the consolidated company’s business or an independent self-sustaining business that is for investment purposes.

Ledger accounts of integrated subsidiaries are converted and transferred to the consolidation company according to the accounting convention of the country/region of the consolidated company. This type of accounting convention is called a temporal translation method.

To implement a translation method, you must set up the consolidated company before you run the consolidation and select the correct consolidation conversion principle for each ledger account in the consolidated company. Set this up in the field on the tab in the form. The correct exchange rates are then applied to subsidiary data as the data is imported into the consolidated company.

In the consolidated company, you can also specify the two accounts that can be used for conversion differences that might arise during consolidation. In the import or online forms, indicate for each subsidiary the consolidated company account that receives conversion differences before running the consolidation. For integrated subsidiaries, a account is frequently chosen for the differences account.

For more information, see Prepare a consolidated company for a consolidation.

Consolidation conversion principles also enable the transfer of the ledger accounts of self-sustaining subsidiaries to the consolidated company according to the "current" translation method of the country/region.

In practice, however, the consolidation of self-sustaining subsidiaries is usually handled in a simpler way: After the integrated subsidiaries are successfully consolidated (and no further changes are allowed), the result (profit or loss) of the self-sustaining subsidiary is posted in the closing sheet of the consolidated company to profit and loss account, and the assets and liabilities are posted to one or two balance accounts.

If there are several self-sustaining subsidiaries, a company is sometimes created to sum up the results of all the self-sustaining subsidiaries. This company is then consolidated into the consolidated company by using the periodic job.

The method that you choose to consolidate the results of self-sustaining subsidiaries must be in accordance with the accounting requirements of your country/region.

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