Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Exchange Rates & Stock

crispycrispy Trusted RegularSouthamptonRegistered Posts: 456

Where I work we have had a large amount of goods delivered from a US supplier, and as at year end the items still remain in stock. The supplier invoice was not actually received until 4 months after year end, what I am wondering is should the invoice be entered using the exchange rate at the time of supply (which would then match to the stock valuation) or at the date of the invoice ?

Thanks for any feedback.


  • HenryHenry Feels At Home Registered Posts: 56
    Hi Crispy,
    It would seem to me that if you got an invoice saying you owe the supplier $100 dollars then that is what you owe them irrespective of the prevailing exchange rate at the time. So if the value of the pound has risen in relation to the dollar (which it has recently) then it seems you are making an exchange arbitrage gain on the transaction, because you will now be paying out less pounds in order to buy dollars than 4 months ago. The invoice should therefore be entered as at current exchange rate since this is the rate you will be paying the value of the invoice at.

    Remember that stock should be valued at lower of cost and net realisable value. I believe the cost of the stock should be based on the current exchange rate since this will be the actual price paid? Otherwise there will be a descrepancy between the Asset (Stock) and the coressponding liability. Hope this helps.
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    I think use the exchange rate at the date of supply.

    And the differences would go to a exchange rate gains/losses account.

    But you'd be better getting advice from someone that operates a system like this.
  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456

    Thanks a lot for your answer. My problem is that the material was received in December and entered into stock valuation as at that date using the exchange spot rate at this point. The invoice was not received until 4 months later, if I enter the invoice at today's rate this would not the match the stock value (by a material amount).

    My normal approach would be to enter the invoice using exchange rate at the time of supply/service and then revalue the creditors at month end and take any exchange difference to profit & loss, is this correct ?

    Thank you
  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456
    As I type PGM appears to have provided an answer, thanks again to both of you
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