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Exchange Rate Adjustment in Dynamics 365 Business Central: Unrealized Forex Gain/Loss

 Microsoft Dynamics 365 Business Central has a smart feature called 'Exchange Rate Adjustment. It is a powerful tool that automatically calculates unrealized foreign exchange gain and loss on open documents at month-end, perfectly handling currency fluctuations for you.

Before you can run the 'Exchange Rate Adjustment,' you'll first need to set up the month-end exchange rates on the Currencies page in Business Central.


Setup Month-end exchange rates

Page: Currencies

1.    Select the "Exchange Rate".


2.    Enter the Month-end exchange rates into "Relational Adjmt Exch Rate Amt" based on the month that you will need to adjust.


Once the Month-end exchange rate is setup, you can close the screen.


To Run Exchange Rate Adjustment for the month

Page: Exchange Rate Adjustment

1.    For the Starting Date, leave this field blank. This ensures that all open transactions are included in the foreign exchange gain/loss calculation, giving you a complete picture.
2.    The Closing Date acts as your cut-off. Any open documents up to and including this date will be included in the foreign exchange gain/loss calculation.
3.    The Posting Date should be same Ending Date.
4.    Document No., I usually input the month and year of the adjustment. This helps you easily identify and track these specific currency revaluation entries in your financial records.
5.    When calculating exchange gain/loss, you have the option to include documents originating from Customers, Vendors, and/or Bank Accounts. Simply select all the relevant options to include them in the calculation.
6.    For a detailed breakdown of gain/loss per individual document, select 'Adjust per entry.' If left unselected, Business Central will consolidate the results into a single sum. Choosing 'Adjust per entry' gives you full visibility into each document's foreign exchange impact.
7.    Always a good practice: run 'Preview Posting' first! This allows you to see exactly what entries will be created in your ledger before you finalize the adjustment, helping you ensure accuracy.
8.    For dimension tagging, you have two key choices. If you want the unrealized Gain/Loss GL code to use dimensions as set up in your Chart of Accounts, select 'G/L Account Dimensions' from the Dimension Posting options. Alternatively, to have the dimensions follow those from the original source document, choose 'Source Entry Dimensions.



9.    Furthermore, the exchange rate currency adjustment offers the flexibility to choose specific currencies for adjustment. Or, for ultimate convenience, you can process all currencies simultaneously in a single run.




11.    Once you've reviewed the results in 'Preview Posting' and are ready to finalize, simply uncheck the 'Preview Posting' option and click 'OK' to post the adjustment entries to your books.


12.    A progress message will appear, letting you know when the adjustment process is complete.


13.    To easily review all the posted adjustment entries, simply navigate to the 'Exch. Rate Adjmt. Ledger Entries' page.




What Happens When the Same Document is Revalued Next Month?

If your business performs monthly foreign currency revaluations, any open documents that remain unsettled will need to be revalued each month. Just simply repeat the same "Exchange Rate Adjustment" process detailed earlier.

Take note that Business Central doesn't compare the document's original value to the new month-end rate. Instead, it takes the document's last revalued amount and compares it to the current month's revaluation amount. This calculates the unrealized forex gain/loss for the current month only, providing precise, incremental adjustments that reflect fluctuations within that specific period.

To illustrate, the table below demonstrates the adjustment calculations from January to April 2025. This example uses an invoice valued at SGD 500, which was initially captured with a local currency (MYR) value of MYR 1600.



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Location: Kuala Lumpur, Federal Territory of Kuala Lumpur, Malaysia

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