Hope this might be helpful:
Consolidation using Historical Rate in Business Central primarily applies to non-monetary accounts, typically found in a foreign currency subsidiary (like your Subsidiary 2 - GBP). Monetary accounts (cash, receivables, payables) are always translated at the closing rate.
Here's how it works and the setup:
How Historical Rate Works in Consolidation:
- Average Rate: Used for P&L (Income Statement) accounts. It applies an average exchange rate for the period being consolidated.
- Closing Rate: Used for monetary Balance Sheet accounts (e.g., Cash, Accounts Receivable, Accounts Payable). It applies the exchange rate as of the consolidation date.
Historical Rate: This is specifically for non-monetary Balance Sheet accounts (e.g., Fixed Assets, Inventory, Share Capital, Retained Earnings). For these accounts, the system uses the exchange rate that was in effect when the original transaction occurred or when the asset was acquired/liability was incurred. This rate is typically either:
- Manually entered: You input a specific historical rate for a G/L account.
- Derived from specific transactions: For some assets (like fixed assets), the system might use the rate at their acquisition date if recorded.
- From the
Consol. Translation Method on the G/L Account: This is where you tell BC how to translate specific G/L accounts.
Setup for Historical Rate (Consol. Translation Method):
You need to set the Consol. Translation Method to Historical Rate on the G/L Account card in the Subsidiary Company (Subsidiary 2 - GBP).
Subsidiary 2 (GBP):
For non-monetary G/L Accounts (e.g., Fixed Assets, Inventory, Equity accounts like Share Capital, Retained Earnings, or specific Cost of Goods Sold accounts if you want them at historical rates):
Go to the Chart of Accounts in Subsidiary 2 (GBP).
For each relevant G/L account, open its G/L Account Card.
On the "Consolidation" FastTab, set the "Consol. Translation Method" field to "Historical Rate".
- How the Rate is Determined:
- Manual Override: You can also manually enter a specific "Historical Rate" directly on the G/L Account card for a fixed rate, or enter it in the consolidation process itself for certain accounts.
- For Fixed Assets: If you have fixed assets, their acquisition cost in the consolidation company might be translated at the rate on the acquisition date.
- For Retained Earnings: Retained Earnings typically use a cumulative approach, where each year's profit/loss is translated at the average rate for that year. The
Consol. Translation Method on the Retained Earnings account might be Historical Rate but often needs careful management due to accumulated profits.
Subsidiary 1 (USD): Since Subsidiary 1 is already in USD (same currency as the Holding Company), no currency translation is required. Therefore, you do not need to set the Consol. Translation Method to "Historical Rate" or any other method for accounts in Subsidiary 1.
Example Scenario:
Let's say Subsidiary 2 (GBP) has:
- Fixed Asset (Machinery) G/L Account: Set
Consol. Translation Method = Historical Rate.
- Acquired on Jan 1, 2024 for GBP 100,000. Exchange rate on Jan 1, 2024 was 1 GBP = 1.25 USD.
- When consolidated, this asset would appear as 125,000 USD in the Holding company's consolidated balance sheet, regardless of the current closing rate.
- Inventory G/L Account: Set
Consol. Translation Method = Historical Rate.
- If inventory was purchased at various rates, the system might use a weighted average historical rate or require manual intervention for specific inventory valuations.
- Sales G/L Account: Set
Consol. Translation Method = Average Rate.
- If total sales for the month were GBP 50,000, and the average rate for the month was 1 GBP = 1.20 USD, sales would consolidate as 60,000 USD.
- Bank Account G/L Account: Set
Consol. Translation Method = Closing Rate.
- If the bank balance on the consolidation date was GBP 20,000, and the closing rate was 1 GBP = 1.22 USD, cash would consolidate as 24,400 USD.
Key Point when Running Consolidation:
When you run the "Consolidate" process, the system uses the exchange rate type (Average, Closing) defined in the consolidation wizard for the entire consolidation run, but then it overrides that for specific G/L accounts where Consol. Translation Method is set to Historical Rate.
It's a powerful but nuanced feature, often requiring careful setup and understanding of your specific G/L accounts and how their balances should be translated.
✅ Mark this answer as verified if it helps you.
Share
Report
40
All responses (
Answers (
