Have you checked with the application provider to a) confirm the application is SQL 2012 compatible and b) verified connection string changes for SQL 2012 that they recommend?

Based on the database name, it appears the software you are looking at configuring is either Axapta or it is Dynamics AX. Unless you are using the latest version of Dynamics AX, it is not SQL 2012 compatible. And looking at the versions of Axapta that were available in SQL 2005, I would say that app is also not compatible.

But these are just wild guesses at your application.