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inventroy valuation for imported raw materials

Praveen Warrier (Asst Finance Manager) (49 Points)

04 August 2009

which is the relevant date for foreign exchange conversion rate to INR when a company purchases and holds imported raw materials in stock @ foreign currecny on closing balance sheet date. is it the date of receipt or closing balance sheet date ? & the copmany not paid for the purchased materials and libility exist on closing balance sheet date

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3 Replies

Dilip (chief Accounts Officer) (79 Points)
Replied 05 August 2009

for accounting purpose you can do the purchase entry in indian currency @ on the date of invoice of such imported materials.

later at the time of payment, any difference in amount can be adjusted by debiting / crediting to currency fluctuation account.

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CA munjal (articled clerk) (100 Points)
Replied 05 August 2009

For accounting purpose, since creditor for goods is a monetary item first at the initial recognisition it will be recorded at exchange rate prevailing on transaction date. On balance sheet date creditors will be re-stated by exchange rate prevailing on balance sheet date.For the purpose of inventory valuation rate on the transaction date will be taken. Exchange rate prevailing on the balance sheet date will not have nay impact.

Jatin Nigam (Chartered Accountant) (54 Points)
Replied 06 August 2009

In case of imported raw material , date on which transaction is recorded is the date on which material is actually received at the premises of importer , so currency rate is the date of receipt & account should take conversion rate on that day for recording transaction, however at balancesheet date if the account is outstanding then the exchange fluctuation entry is to be passed which will either increase or decrease the liablity as on balncesheet date .However imported raw material is valued at the date of receipt.