what Exchange rate to use?

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Hello all, please could someone advise on this one. I had a potential client question if he is accounting for income earned whilst selling his craft goods at a fair in Norway correctly. 

He sells hand made craft items at specialist fairs and travels to Norway occasionally to do this. When he arrives home he banks the foreign currency and accounts for his income at the point when the conversion is entered into his bank at the uk pound value actually received into his bank. 

He has been given conflicting advice from various sources as to if this is the correct method. He has been told he should rcpt income based on the exchange rate at month end and also told to do it at year end. 

We are not talking tens of thousands of pounds just a few thousand at max. 

Does anyone else have experience with this? 

Replies (4)

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By johngroganjga
20th Jan 2018 09:27

Assuming he is holding no foreign currency at his year end, the advice he has received is pointless over-elaboration and will not affect his reported profits by a single penny.

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Replying to johngroganjga:
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By Katkin
20th Jan 2018 09:56

Thank you, I thought the same but had a slight confidence crisis when asked the question.

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ALISK
By atleastisoundknowledgable...
20th Jan 2018 09:35

If he is holding foreign cash / bank account at the year-end, I use xe.com to convert the y/e Balance.

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RLI
By lionofludesch
20th Jan 2018 10:01

Who's told him that rubbish ? Sounds like the bloke who wrote the interest free loan section of FRS 102.

I agree with John - strictly he should be recording sales at the spot rate on the day and then making a loss/gain on exchange adjustment but it would all be a tremendous waste of time as the overall profit would be the same (assuming, as John did, that he holds no funds at the year end).

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