Revenue recognition

Revenue recognition

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If a client invoices in foreign currency for goods shipped at a later date what rate should be used for revenue recognition.

e.g. a client invoices $100,000 at $1.5494 (£64,541) on 01/09 for goods to be shipped on 01/11, he receives $100,000 on 01/10 a $1.6163 (£61,870) giving him a recognisable loss on the debtor of £2,671.

If the rate at 01/11 is $1.6033 should the revenue in the accounts be £62,371 giving a gain of £2,170 or left at £64,541 with no further exchange gain/loss.

Replies (3)

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By johngroganjga
20th Jan 2014 17:30

The end result is the same of course but it has to be simpler to use the exchange rate on the date the invoice is raised. 

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By Richieinspain
21st Jan 2014 23:50

I hope the below helps!

Use the spot exchange rate on the date of sale/transaction date (not delivery): Cr sales, Dr A.Receivable

When payment is made, use the spot exchange rate on the settlement date: Cr A.Receivables, Dr bank.

If the exchange rates are different than there will be an FX gain or loss; Dr or Cr A.Receivables and send the other side to the P&L

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By johngroganjga
22nd Jan 2014 08:09

Agreed.  Use spot rate at

Agreed.  Use spot rate at date of invoice, as I said.  That is in fact the only decision required as everything else follows.

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