Implementing COGS with multicurrency

Vladimir Avramenko vladimir.avramenko at gridnine.com
Fri Jan 31 11:23:17 EST 2014


OK.

Thank you very much for explanations

Vladimir

________________

>>You incurred the liability at the point of getting the goods from your
>>vendor, I would suggest this sets your basis, rather than your
>>transaction with your customer. But again I would talk to a tax
>>professional as these rules can be complicated.

On 31 January 2014 08:56, Vladimir Avramenko
<vladimir.avramenko at gridnine.com> wrote:
> Thank you for response, Alun.
>
> As you pointed, the alternative is to track account Assets: Inventory:
> Tickets in EUR. In this case your scheme is transformed to the following
> one:
>
> Receive tickets for resale (1EUR=1.3 USD):
> Liabilities: A/P: EURO 100
> Assets: Inventory: Tickets: EURO 100
>
> Sell ticket (1EUR=1.3 USD) :
> Income: Sales: $130
> Income: Fee: $10
> Assets: Account: $140
> Assets: Inventory: Tickets: EURO 100
> Trading: EUR: EURO 100
> Trading: USD: $130
> Expense: COGS: $130
>
> Pay vendor for tickets (1EUR=1.4 USD):
> Assets: Account: ($140)
> Trading: USD: $140
> Trading: EUR: EURO 100
> Liabilities: A/P: EURO 100
> Trading: USD: $10
> Expenses: Currency Loss: $10
>
> The net result is equal for both schemes:
> Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: ($130)+Expenses:
> Currency Loss: ($10)
>
> Suppose that exchange rate when i received ticket from vendor was 1EUR=1.2
> USD. In your scheme:
> Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: ($120)+Expenses:
> Currency Loss: ($20)
>
> In the second scheme the statement does not change:
> Income: Sales($130)  + Income: Fee($10)  = Expense: COGS: ($130)+Expenses:
> Currency Loss: ($10)
>
> From my point of view the second scheme is closer to "real cash flow":
> conversion of currencies takes place at two moments: when selling to
> customer and when paying to vendor (and not when borrowing ticket from
> vendor).
> What do you think?
>
> ______________________
> Thank you in advance,
> Vladimir
>
> On 01/31/2014 05:42 PM, Alun Champion wrote:
>
> You should check with a tax professional when you should count the
> asset in your home currency but here's how it could work. If you
> receive and sale at the same time then the first 2 transactions could
> collapse to one and you wouldn't need the Tickets account.
>
> Receive tickets for resale (immediately book in home currency):
> Liabilities: A/P: (EURO 100)
> Assets: Inventory: Tickets: $130
> Trading: EUR: EURO 100
> Trading: USD: ($130)
>
> Sell ticket - direct payment (alternatively use a A/R account to
> separate customer sale and payment)
> Assets: Account: $140
> Income: Sales: ($130)
> Income: Fee: ($10)
> Assets: Inventory: Tickets: ($130)
> Expense: COGS: $130
>
> Pay vendor for tickets:
> Liabilities: A/P: EURO 100
> Assets: Account: ($140)
> Trading: EUR: (EURO 100)
> Trading: USD: $140
> Trading: USD: ($10)
> Expenses: Currency Loss: $10
>
>
>
> On 31 January 2014 01:08, Vladimir Avramenko
> <vladimir.avramenko at gridnine.com> wrote:
>
> There is perfect explanation for the process with single currency given in
> http://permalink.gmane.org/gmane.comp.gnome.apps.gnucash.user/44097
>
> Could someone please give me the similar scheme for the case of two
> currencies. Namely:
> 1. Suppose my Company resells air tickets in USD.
> 2. Company takes a ticket from Vendor (Vendor works with EUR, and the ticket
> costs 100 EUR)
> 3. Company resells ticket to Customer in USD with rate EUR = 1.3 USD plus
> Company takes an additional Fee 10 USD from Customer
> 4. Company pays 100 EUR to Vendor with rate EUR=1.4 USD
>
> It is preferable to use Trading account because, according to article
> http://www.mathstat.dal.ca/~selinger/accounting/tutorial.html, it is the
> most correct way to deal with multicurrency.
> ______________________
> Thank you in advance,
> Vladimir
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