LIFO vs FIFO

[maxhiggins]

Ok, I can’t get this topic. What exchange rates do you use in each of these methods?
current method
lifo?
fifo?
temporal method
lifo cogs?
lifo inventory?
fifo cogs?
fifo inventory?
i know that it matters if they say purchases were made evenly throughout the year, but what if they were not?

 

[bfry]

Current Method - use the current rate for inventory. Average rate for COGS.
Temporal Method - Historical rate for inventory and COGS.
Each vignette will differ on what rates to use for inventory or COGS here you just have to read and pick up on the clues. Like they will say all inventory was purchased on Dec 1, 20X1. Then for the temporal method you would use that rate for inventory and COGS as well (assuming no other purchases). They have to provide you with this information.

 

[biuku]

Technically, under Current Rate, if you purchase inventory every day you could use 365 FX’s. But that’s impractical, so normally you use the average rate during the year, which assumes you buy inventory evenly.
But if you bought 80% of your inventory in November for the Christmas season, and the FX changed a lot from the first half to second half of the year, I would think that the average rate would tell the wrong story.

 

[Harrogath]

biuku wrote:
Technically, under Current Rate, if you purchase inventory every day you could use 365 FX’s. But that’s impractical, so normally you use the average rate during the year, which assumes you buy inventory evenly.
But if you bought 80% of your inventory in November for the Christmas season, and the FX changed a lot from the first half to second half of the year, I would think that the average rate would tell the wrong story.

You don’t translate financial statements every day, just at the end of the year (or quarter who knows). So, for the current method you use current rate at the time of translation.

 

[krokodilizm]

For this whole chapter I use the two tables below and the information here covers some 80% of the reading.

 

[biuku]

For Current Rate method, you use average FX to translate COGS if average FX fairly expresses how you acquired the inventory sold.