Currencies, Deferrals & Exchange Rates

Multi-currency in Business Central

Setting up currencies

Creating currency codes

1. Open Currencies (Tell Me > “Currencies”)
2. Create each foreign currency your company uses:

Field	Purpose	Example
Code	ISO currency code	USD
Description	Full name	US Dollar
Unrealised Gains Acc.	GL account for unrealised FX gains	8410
Realised Gains Acc.	GL account for realised FX gains	8420
Unrealised Losses Acc.	GL account for unrealised FX losses	8430
Realised Losses Acc.	GL account for realised FX losses	8440
Invoice Rounding Precision	How to round on invoices	0.01

Exchange rates

For each currency, maintain exchange rates:

1. Open the currency card > Exchange Rates
2. Enter rates with a Starting Date
3. BC uses the rate valid on the posting date of each transaction

Starting Date	Exchange Rate Amount	Relational Exch. Rate Amount
01/01/2026	100	160.50
01/02/2026	100	162.30
01/03/2026	100	158.75

This means 100 USD = 160.50 NZD in January, 162.30 NZD in February, etc.

ℹ️ Automatic exchange rate updates

Business Central can automatically fetch exchange rates from online services:

1. Open Currency Exchange Rate Services (Tell Me)
2. Enable a service (European Central Bank is built-in)
3. Map the service fields to your currency codes
4. Schedule via a job queue entry to update daily

This is what Sam sets up as a daily job queue — no more manual rate entry.

Realised vs unrealised gains/losses

Realised vs unrealised exchange differences

Type	When It Occurs	Example	Impact
Unrealised	When you adjust open entries at period-end	Invoice recorded at 1.60, period-end rate is 1.65	Temporary — may reverse when paid
Realised	When payment is applied to the invoice	Invoice at 1.60, paid when rate is 1.63	Permanent — actual gain or loss

Deferrals

Setting up deferral templates

1. Open Deferral Templates (Tell Me > “Deferral Templates”)
2. Create a template:

Field	Purpose	Example
Deferral Code	Template identifier	INSURANCE-12M
Description	Readable name	12-month insurance deferral
Deferral Account	GL account for the deferred balance	1850 (Prepaid Expenses)
Deferral %	Percentage of the amount to defer	100%
Calc. Method	How to spread across periods	Straight-Line
No. of Periods	Number of periods to spread over	12
Start Date	When deferral recognition begins	Posting date of the document

Deferral calculation methods

Method	How It Spreads	Best For
Straight-Line	Equal amounts each period	Insurance, rent, subscriptions
Equal Per Period	Equal amounts (similar to straight-line)	Standard distributions
Days Per Period	Proportional to days in each period	Exact matching (February gets less than March)
User-Defined	Manual allocation per period	Irregular patterns

How deferrals work in practice

When Olivia posts a $12,000 insurance invoice with the INSURANCE-12M template:

1. Posting date: January 1, 2026
2. Immediate entry: Debit Prepaid Expenses (1850) $12,000, Credit AP
3. Monthly recognition: $1,000 per month for 12 months:
   • Jan: Debit Insurance Expense, Credit Prepaid Expenses $1,000
   • Feb: Same
   • … through December

The deferral schedule is created automatically and posts to the GL on each period’s start date via a batch job or manual posting.

💡 Exam tip: Deferrals on sales vs purchases

Deferrals work on BOTH sides:

• Purchase deferrals — spread expenses over periods (insurance, software licences, annual maintenance)
• Sales deferrals — spread revenue over periods (annual service contracts, prepaid subscriptions)

The deferral template is assigned at the document line level, not the header. Different lines on the same invoice can have different deferral schedules.

Question

What's the difference between realised and unrealised exchange gains/losses?

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Answer

Unrealised = period-end adjustment of open entries (temporary, may reverse). Realised = actual gain/loss when payment is applied and the rate differs from the original posting rate (permanent).

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Question

What is a deferral template?

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Answer

A configuration that defines how to spread revenue or expenses across multiple periods. It specifies the calculation method (straight-line, days per period), number of periods, and the GL deferral account.

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Question

Where are deferral templates assigned?

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Answer

At the document line level, not the header. Different lines on the same invoice can have different deferral schedules. Templates can also be set as defaults on GL accounts.

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Knowledge check

Knowledge Check

Coastal Traders received a USD invoice for $5,000 when the rate was 1 USD = 1.60 NZD (recorded as NZ$8,000). At month-end, the rate is 1 USD = 1.65 NZD. The invoice is still unpaid. What happens when Olivia runs the exchange rate adjustment?

ANothing — the invoice is only adjusted when paidBAn unrealised loss of NZ$250 is posted (the liability increased from NZ$8,000 to NZ$8,250)CA realised loss of NZ$250 is postedDThe original invoice amount is changed from NZ$8,000 to NZ$8,250

Check Answer

Knowledge Check

Olivia receives a $6,000 annual software subscription invoice on July 1. She wants to spread the expense evenly from July to June. Which deferral template settings should she use?

ACalc. Method = Straight-Line, No. of Periods = 6, Deferral % = 50%BCalc. Method = Straight-Line, No. of Periods = 12, Deferral % = 100%CCalc. Method = Days Per Period, No. of Periods = 12, Deferral % = 100%DCalc. Method = User-Defined, No. of Periods = 12, Deferral % = 100%

Check Answer

🎬 Video coming soon

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Next up: Now let’s structure your financial data with the Chart of Accounts and learn how account categories power financial reporting.