Dear Members,
I would really appreciate if you could help me with one question.
I work in a real estate company which sells villas. The functional currency is Albanian Lek (AL), but we sell villas in Euros and so are the most of costs (cost of villas).
We apply IFRSs for our financial statements.
Cost of villas is in Eur and when the costs have been recorded, the exchange rate has been 1 eur = 130- 140 All during a period of three years .
Now when we are selling the villa and recognise revenue, the exchange rate is 1 Eur= 122 all.
So when we translate revenues and costs of goods sold( after selling inventory (villa) ), it results in a huge exchange loss due to exchange rate fluctuations.
Is there any way or method to eliminate this exchange loss as it affects P&L.
You would help me so much with this issue!
Wish all the best for all of you!
Best Regards,
GB
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Replies (4)
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Can I have one of your villas for free?
I thought not.
So why do you think we will provide our valuable professional expertise to you for free? I'm sure there is enough margin in your business to afford to pay an accountant.
Free not, but who said not with a discount?
We do have accountant, but this an issue which we stucked with it.
No need to be so mean!
Unfortunately, that's how the accounting is supposed to work!
Options are:
1. Change presentational currency to Euros
2. Hedge your FX
Thanks John,
I think is not possible to change the presentation currency as this decision belongs to management and also is forceble by laws in my country.
I thought if there exist any loophole which allows me to not recognise the loss in P&L, but instead in Other Comprehensive income.
But IAS 21 specifies that these gains and losses are to be recognised in P&L