When a company has subsidiaries operating in different currencies, their financial data must be converted into a common currency before preparing consolidated financial statements. Microsoft Dynamics 365 Business Central handles this conversion during the consolidation run, based on a translation method that you set on each general ledger account.
Historical Rate translates a general ledger account using the exchange rate that applied when each original transaction was posted. You set it on the G/L Account card in each subsidiary company, under the Consolidation FastTab. You do not enter a historical rate when you run the consolidation. Business Central takes it from each transaction’s posting date.
The five translation methods in Business Central
The Consol. Translation Method field on each G/L account offers five options. Choosing the right one for each account is what makes your consolidated figures accurate.
| Method | Rate used | Typical accounts |
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| Average Rate (Manual) | The average rate for the period, which you calculate and enter yourself | Income Statement (Profit and Loss) accounts |
| Closing Rate | The rate at the consolidation end date | Monetary Balance Sheet accounts, such as Cash and Bank Accounts |
| Historical Rate | The rate in effect when each transaction was posted | Non-monetary Balance Sheet accounts, such as Fixed Assets, Inventory and Equity |
| Composite Rate | Current period amounts at the average rate, added to the balance already recorded in the consolidated company | Retained Earnings |
| Equity Rate | The same as Composite Rate, with differences posted to separate general ledger accounts | Other equity accounts |
Average Rate (Manual)
Rate usedThe average rate for the period, which you calculate and enter yourself
Typical accountsIncome Statement (Profit and Loss) accounts
Closing Rate
Rate usedThe rate at the consolidation end date
Typical accountsMonetary Balance Sheet accounts, such as Cash and Bank Accounts
Historical Rate
Rate usedThe rate in effect when each transaction was posted
Typical accountsNon-monetary Balance Sheet accounts, such as Fixed Assets, Inventory and Equity
Composite Rate
Rate usedCurrent period amounts at the average rate, added to the balance already recorded in the consolidated company
Typical accountsRetained Earnings
Equity Rate
Rate usedThe same as Composite Rate, with differences posted to separate general ledger accounts
Typical accountsOther equity accounts
Note that you only enter two rates when you run a consolidation: the average rate and the closing rate. Business Central works out the Historical, Composite and Equity translations for you. If a subsidiary uses the same currency as the holding company, no currency translation setup is required.
The Historical Rate translates an account using the exchange rate that existed when the original transaction took place.
Instead of using today’s exchange rate, Business Central keeps the original value of long-term assets and equity accounts. This provides a more accurate representation of these balances in consolidated financial statements.
Which accounts use Historical Rate?
Historical Rate is commonly used for:
- Fixed Assets
- Inventory
- Share Capital
- Other Equity accounts
Monetary accounts like Cash, Bank Accounts, Accounts Receivable and Accounts Payable continue to use the Closing Rate, while Income Statement accounts use the Average Rate.
Why Retained Earnings is treated differently
Retained Earnings is the one account that often trips teams up. Microsoft recommends Composite Rate for Retained Earnings, because that balance is made up of profits earned across several periods, each translated at a different rate. Some published guidance places Retained Earnings under Historical Rate instead, so confirm your choice with your auditor before you go live.
How to set up Historical Rate
Set the translation method in the subsidiary company, not the holding company. The Consol. Translation Method field sits on the G/L Account card in each business unit’s own chart of accounts.
To configure Historical Rate in a foreign currency subsidiary:
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Select the required G/L Account.
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Open the G/L Account Card.
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Under the Consolidation FastTab, set Consol. Translation Method to Historical Rate.
Repeat these steps for each non-monetary account that should use the historical exchange rate. You can also turn on Exclude from Consolidation on this same FastTab to keep an account out of the run entirely.
If your charts of accounts do not match
The Consol. Debit Acc. and Consol. Credit Acc. fields are safe to leave blank only when the subsidiary and the consolidated company use the same account numbers. Left blank, Business Central assumes the account maps to an identical account in the consolidated company.
If the two charts of accounts differ, complete both fields on every account you consolidate so the translated balance lands in the right place. The translation method and the account mapping are separate settings that happen to sit on the same FastTab, so setting one does not cover the other.
![G/L Account Card Consolidation FastTab showing Consol. Translation Method set to Historical Rate]()
Note: If a subsidiary uses the same currency as the holding company, no currency translation setup is required.
Before you run the consolidation
Historical Rate depends on rates already sitting in your Currency Exchange Rate table. Check three things first.
- Confirm a rate exists for every posting date you are translating. A missing rate will stop the run.
- Run the Adjust Exchange Rates batch job for customers, vendors and bank accounts.
- Use Test Database or Test File from the Business Units page before you post anything.
If a rate is missing for an older date
When Business Central cannot find a rate for a transaction’s posting date, the consolidation stops and you may see an error telling you there is no Currency Exchange Rate within the filter. Historical Rate accounts trigger this more often than any other method, because they reach back to dates you may never have needed a rate for.
There are two ways to fill the gaps:
- Enter the rates by hand on the Currency Exchange Rate page. This is practical when you only need a handful of dates.
- Import them from Excel using a Configuration Package. Build a file with Currency Code, Starting Date and Exchange Rate columns, then import it into the Currency Exchange Rate table.
Business Central does not fetch historical rates for you, so allow time for this work before your first consolidation rather than discovering it mid-close.
Three reports cover most of what you need after a run.
- Consolidated Trial Balance combines the general ledger balances of every business unit into one trial balance. Use it for a high-level check that your group totals look sensible.
- Consolidated Trial Balance (4) is the report to open when you are verifying translation. Its four columns show the local balance, the converted value, eliminations and the total side by side, so you can compare what a Historical Rate account held in its own currency against what actually landed in the consolidated company.
- G/L Consolidation Eliminations removes internal transactions between your entities. Run it once all intercompany transactions are posted, before you publish group figures.
Frequently asked questions
Do I set Consol. Translation Method in the subsidiary or the holding company?
In the subsidiary. The field sits on the G/L Account card in each business unit’s own company, under the Consolidation FastTab, so you set it once for every non-monetary account in each foreign currency subsidiary. Repeat the setup in every subsidiary you plan to consolidate, because the method is stored per account rather than per group.
Where does Business Central get the historical rate from?
From the Currency Exchange Rate table, matched to the posting date of each transaction in that account. Because the translation happens entry by entry, two postings inside the same period can convert at two different rates. That is why the rates for those older dates need to exist in the table before you start the run.
Can I enter a historical rate during the consolidation run?
No. The consolidation run and the Set Up Business Unit Currencies page ask you only for the average rate and the closing rate. Accounts marked as Historical Rate are translated automatically from their posting dates, so there is no field to type a rate into or override at run time.
Should Retained Earnings use Historical Rate?
Microsoft recommends Composite Rate. Retained Earnings builds up from profit earned across several periods, and Composite Rate translates the current period at the average rate and then adds it to the balance already recorded in the consolidated company. Some published guidance recommends Historical Rate instead, so treat this as an accounting policy decision and confirm it with your auditor.
Do I need this setup if my subsidiary uses the same currency?
No. Translation methods only apply when a business unit reports in a different currency from the consolidated company. You may still need to complete the Consol. Debit Acc. and Consol. Credit Acc. fields on each account if the subsidiary uses a different chart of accounts from the parent.