One of the new features of Microsoft Dynamics NAV 2016 is Deferrals, where the user can defer either Revenue or Expenses over a specified period.
Microsoft created this in a very straightforward manner, where you only need to set up Deferral Templates.
There are options to manually assign the Deferral code during transactions, or make the Deferaral code a default to Item Cards and Chart of Accounts, depending on the company’s business requirements.
However, there are number of issues related to the calculation of Deferrals if the Sales/Purchase Lines are taxable.
Microsoft released the Cumulative Update 12 for NAV 2016 (Build 47042) to fix this issue.
|Wrong G/L entries are created when a purchase line contains a deferral code and a sales tax jurisdiction contains a tax detail using the Expense/Capitalize Sales Tax functionality in the North American version.
|TAB 37 TAB 39
Although this issue is fixed on the Purchase Invoice Line, there is another issue in Sales Lines. The user will still encounter issues in NAV2016 CU12-CU14. Incorrect G/L Entries are created when a Sales lines is taxable and contains a deferral code.
Here are the steps to replicate:
- Create Deferral Template – e.g. to defer the amount over 3 period
- Create Sales Invoice, select a Customer with Tax Jurisdiction in BC
- Create a Sales line, assign the Deferral Code and Tax Group = Taxable
- Click the Preview Posting
Notice that the Deferral calculation is using the “Amount Including Tax” instead of the Amount Excluding Tax. As the sample transaction is Revenue/Unearned Revenue, recognition of taxes should be based on the recording of the Accounts Receivable and not when the revenue is earned.
As there is no fix yet from Microsoft, a workaround is needed to be able to achieve the correct G/L Entries for Deferral in Sales Invoice:
- On the Sales Invoice Line that has the Deferral code assignment, make the Tax Group Code as Non-tax. This way, no tax amount will be included in the Deferral. Then, create another line to record the Tax Amount with Deferral code = Blank.
Hope this helps.
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