Year end stock revaluation

Year end stock revaluation

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We are at our company year end and my FC is suggesting that we revalue our stock at the year end exchange rate.

I understand that this is the case for Assets and Liabilities held in foreign currency at the year end by I do not agree that it is the case in this instance.

Although the majority of our stock has been purchased in Euros and Swiss Francs our accounting software (SAP B1) converts the cost of the stock to GBP at the purchase invoice date (at the exchange rate applicable at the time).

We only sell in GBP so once we hold the stock and have paid the Creditor my view is that currency fluctuations are not really relevant to the value of the stock we hold.

One of the FC's arguments is that if we were to replace all the stock it would be at the current exchange rate (which I accept) but I believe that SAP revalues the stock at the last purchase price so it is already taking foreign exchange movements into account.

I would be surprised if the FC is incorrect but they have so far failed to convince me my thinking is incorrect

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By johngroganjga
11th Apr 2015 16:48

You are right, but your FC is making a common mistake. Stock is not a monetary item.

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