Peers,
My question is about the exchange variations purchase price of inventory.
As far as IAS 2 goes I understand that any exchange variation on purchase of inventory is excluded from the inventory cost, however I am hearing in my organization people talking about using blended exchange rate for the calculation of purchase price of inventory which does not make any sense to me.
Here is the example:
Let us say I want to purchase USD $100 worth of inventory from United States, my reporting currency is CAD and the payment terms states that I have to pay 10% down. Now assuming the exchange rate to be US$1 = CAD 1.2 I make 10% which is $12 as advance payment and on the day I receive the inventory the conversion rate is 1.4. At what cost will I be recording my inventory?
is it just going to be 100 *1.4 = $140 or 100 *1.2 which is equal to $120 or is it going to be $ 130 using a blended rate or something else?
Thank you,
Avish
My question is about the exchange variations purchase price of inventory.
As far as IAS 2 goes I understand that any exchange variation on purchase of inventory is excluded from the inventory cost, however I am hearing in my organization people talking about using blended exchange rate for the calculation of purchase price of inventory which does not make any sense to me.
Here is the example:
Let us say I want to purchase USD $100 worth of inventory from United States, my reporting currency is CAD and the payment terms states that I have to pay 10% down. Now assuming the exchange rate to be US$1 = CAD 1.2 I make 10% which is $12 as advance payment and on the day I receive the inventory the conversion rate is 1.4. At what cost will I be recording my inventory?
is it just going to be 100 *1.4 = $140 or 100 *1.2 which is equal to $120 or is it going to be $ 130 using a blended rate or something else?
Thank you,
Avish