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Dynamics NAV: Changing Fiscal Years

“The only constant in business is change!”

One of my clients recently had reason to change their fiscal year. Corporations referred to as Schedule C companies (C Corps) are allowed to have fiscal years that end at periods other than calendar year end. They changed to a business form that required they use a calendar year end. Specifically, without identifying the client of course, they changed from a fiscal year ending 11/30 to a calendar year. The need therefore was to process the final tax return for the “C” Corp as of 11/30/15 and to file a stub year that really consisted of the month of December 2015. Thereafter they needed their new Fiscal Year to begin on 1/1/16 and run to 12/31/16 and annually thereafter.

Of course, it was September of 2016 before the issue was broached and the question asked, “How can we change our fiscal year in NAV?”. So the factual situation was this basically:

1. They had closed their year and their income statement for the old fiscal year ended 11/30/15.

2. They filed their tax return for the year ended 11/30/16.

3. They filed their tax return for the stub year beginning 12/1/15 and ending 12/31/15.

4. They did not close (in NAV) the short stub year and did not close the short stub year income statement for the month of December 2015.

5. They have continued to process transactions into the G/L for the for the period from 1/1/16 until late September 2016.

SUMMARY OF STEPS TO CHANGE FISCAL YEAR

1. Delete future periods beyond last date closed

2. Create new stub period for the difference in fiscal years

3. Create the first (and any desired) new fiscal years

4. Close the year for the stub period

5. Close the income statement for the stub period

6. Post the stub period closing entries that appear in the journal

Underlying assumptions:

1. This example is done in NAV 2009 Classic SQL Version to match the clients install

a. Accounting periods have been a fixture in NAV since the very early days

b. There is no reason to believe this process would be different in later versions but these have not been tested

c. The user is responsible for making certain this works by testing it in a test database install before running it in production

2. I suggest backing up the database before beginning this process.

3. I suggest doing it when other users are not in the system.

Screen shots of the step – by – step:

(This is the sample company Cronus USA. The last period closed 12/31/2009)

1. Highlight and delete: Accounting Periods | delete all lines with dates higher than the last date closed, in this case, the blue lines.


2. Create a new stub year: in this case 01/01/10 – 02/28/10

3. Create a new full year: in this case 03/01/10 – 02/28/11

a. NOTE: The Cronus sample database has posted transactional activity beyond 01/01/10 and on out into the 2010 year. The system knows this and does not post an error message.


4. Close the year for the stub period: the year must be closed before the income statement can be closed. A year can only be closed once.

5. The income statement can be closed as often as desired. Closing the income statement multiple times is the way on which post-closing and audit adjustments are made

6. Post the closing entries in the closing journal entry created by the close income statement process.

a. Remember that the data includes periods after the stub period.

b. Consequently, the general ledger and the closing entries may appear a bit odd.

c.


d. IMPORTANT: NOTE THAT THE G/L HAS DATA INTO THE PERIOD BEYOND 02/28/10.

e. ALSO NOTE THAT THE GENERAL JOURNAL CREATED BY THE CLOSE INCOME STATEMENT PERIODIC ACTIVITY HAS “C” ENTRIES MARKED 02/28/10 (closing entries)

f. IN YOUR SYSTEM DO THIS VERIFICATION FOR SEVERAL ACCOUNTS BEFORE DARING TO POST THE CLOSING JOURNAL ENTRY

g. The top panel below shows G/L Entries for G/L Account 43100

i. (-582,767.48) + (-837,802.73) = -1,420,570.21

h. The bottom panel shows this dollar amount proposed to post (with the opposite sign) to account 43100.

i. If the closing General Journal is posted, as it relates to this account, it would zero that portion of the account in the stub year and leave the transactions after that date for the new full year

7. The user processing these changes should:

a. First do the entire process in a test environment

b. Selectively verify individual account totals in the stub period (and beyond) match what you expect to see happen.

c. Verify that an income statement run for the stub period matches the retained earnings entry calculated and proposed for the period being closed

d. The report fragment shown below is a trial balance for the income statement accounts for the period 01/01/10 to 02/28/10: Net income from the trial balance agrees with the closing journal entry.


This is not an everyday transaction in NAV but it is not hard to do and the system is flexible enough to support the business change.

#DynamicsNAV #fiscalyear