MB-920 Consolidation group Practice Question
Contoso Ltd. is a global manufacturing company with legal entities in the US (USD), UK (GBP), and Germany (EUR). They use Dynamics 365 Finance. The CFO wants a consolidated financial report that combines data from all entities into USD, using month-end exchange rates. The consolidation must be performed monthly, and adjustments should be automatically eliminated. The company also needs to maintain separate accounting rules for each entity (e.g., GAAP vs. IFRS). You are tasked with configuring the consolidation process. What should you do?
⚠ Common exam trap
A common mistake is confusing intercompany accounting with consolidation. Intercompany accounting focuses on transactions between entities, whereas consolidation combines the financial statements of separate entities into one.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Set up a consolidation group, define exchange rates, configure elimination rules, and run the consolidation process online.
The consolidation module in Dynamics 365 Finance enables you to set up a consolidation group containing the relevant legal entities, define exchange rates (e.g., month-end rates), configure elimination rules to automatically remove intercompany transactions, and run the consolidation process online. This automates the monthly consolidation into USD while respecting each entity's accounting rules (GAAP/IFRS). Option A is incorrect because intercompany accounting handles transactions between entities, not the consolidated reporting of separate entities. Option B is incorrect because manually exporting/importing trial balances to Excel is error-prone and does not automate the process. Option C is incorrect because a general journal is for manual adjustments, not for running an automated consolidation that includes currency conversion and eliminations.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Configure intercompany accounting and use the intercompany reconciliation report.
Why it's wrong here
Incorrect. Intercompany accounting focuses on recording transactions between legal entities, not on combining financial data for consolidated reporting.
- ✗
Export each entity's trial balance to Excel, apply exchange rates, and import to a consolidated company.
Why it's wrong here
Incorrect. Manually exporting trial balances to Excel, applying exchange rates, and importing is error‑prone and does not leverage the automated consolidation features of Dynamics 365 Finance.
- ✗
Create a general journal to manually post consolidated entries using exchange rates.
Why it's wrong here
Incorrect. A general journal is used for manual adjustments; it cannot automate the consolidation process, currency conversion, or elimination of intercompany transactions.
- ✓
Set up a consolidation group, define exchange rates, configure elimination rules, and run the consolidation process online.
Why this is correct
Correct. Setting up a consolidation group, defining exchange rates, configuring elimination rules, and running consolidation online provides an automated, repeatable monthly consolidation process that meets the CFO's requirements.
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