Some time ago we got question how to install AX 4.0 Reporting Role with SQL Server 2008. As every time when you are trying to install Reporting Services extension from AX 4.0 installation wizard, partner has got error:

The problem is probably somewhere in axsetup. Although we managed to create workaround. The workaround is to create manually the actions axsetup is doing, so we do not need to launch axsetup anymore.

To workaround the problem you need to:
1. Go to report manager
2. Create new folder call Dynamics
3. Create new data source called “Dynamics Database” with following settings:
    a. Enable this data source: true
    b. Connection type: Microsoft SQL Server
    c. Connection string:     

    d. Connect using: select “Credentials stored securely in report server” - put the domain account name which has publishing rights for this instance for SRSS
    e. Select “Use as Windows credentials when connecting to data source”
4. Go to Dynamics AX Client
5. Go to Tools > reporting tools > reporting server
6. Specify the urls for Report Server and Report Manager.
7. Check on Advanced tab if folder name and data source name are the same as one created
8. Click validate button.
9. Try to update report model

To learn more about configuring report builder please visit: http://msdn.microsoft.com/en-us/library/ms365173.aspx

To learn more about SRSS security please visit: http://msdn.microsoft.com/en-us/library/ms156034.aspx

One more issue you can run into when you use reporting extensions for DAX 40: https://mbs.microsoft.com/knowledgebase/KBDisplay.aspx?scid=kb$EN-US$951396&wa=wsignin1.0