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IAS-2 Inventory, allows the inclusion exchange differences arising directly from the purchase of goods under bills in foreign currency in the cost of goods. True or False?
False. IAS2 Inventory. Exchange rate gain/loss arise on purchase of inventory does not effect the inventory valuation.
Exchange differecences arising on purchase of inventory will be reported in Income statement. It will not be included in CGS but it will be appear in Income statement after gross profit .
False.Mr .A Mutaz Bakry Sidahmed, clearly explained. I would like to support the same
ie: Foreign exchange difference should not affect the valuation of inventory as per IFRS.
Regards,
Joshi Mathew
CIA
if inventory if purchase from foreign country it must be translated at the date of purchase in the balance sheet.if suppose company is due to pay in the next three month the double entry is
Dr inventory
Cr payable
suppsoe the company year end is dec and payment is due to be made on31 jan. any exchange difference at year end.. then doulbe entry will be
if xchange lose arise
Dr P&L
cr payable
if xchange gain arise
Dr payable
Cr P&L
IAS23 Borrowing Costs identifies some limited circumstances where borrowing costs (interest) can be included in cost of inventories that meet the definition of a qualifying asset. [IAS2.17 and IAS23.4]
Inventory cost should not include: [IAS2.16 and2.18]
abnormal waste
storage costs
administrative overheads unrelated to production
selling costs
foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a foreign currency
interest cost when inventories are purchased with deferred settlement terms.
False. IAS2 specify that (the cost of inventory should not include: the foreign exchange differences arising on the recent aquisitin of inventories invoiced in a foreign currency) and there are other items also
True we can add the the Exchange differnces in purchsing the Inventory cost.
