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Cost of Goods Sold bought with Foreign Currency

  • 06-01-2011 11:42pm
    #1
    CapedCrusader
    Registered Users, Registered Users 2 Posts: 215 ✭✭


    Hi folks,

    Within a limited company, how do you calculate cost of goods sold using the periodic inventory system when the items are bought with foreign currency?

    I.e. is the value of stock on hand translated into domestic currency using the exchange rate in effect at the end of the reporting period or do you use the average rate at which the goods were bought? Would this then be compared to the cost of stock on hand at the beginning of the reporting period using the exchange rate then?

    Thanks in advance folks.


Comments

  • #2
    bridster007
    Registered Users, Registered Users 2 Posts: 417 ✭✭bridster007


    Simplest way is to set a rate at the start of the month and use that for all purchases/sales during the month.

    Use a mid market rate from one of the banks websites such as AIB's fxcentre website. Get this rate first thing at the start of each month and print a copy. This is then evidence for your audit.

    You should of then revalue AR/AP/banks at the end of each month to the new rate for the next month.

    Inventory does not get revalued - it stays valued at its original cost.


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