Inventory revaluation


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Dear experts,

I would like to inquire regarding the existing inventory revaluation that our company is currently doing. We are a manufacturing company, our Raw Materials purchases are Pesos and Dollars. Every 6 months, they revalue the amount of the inventory in dollar using the average rate. For January, they use average rate for december and for July they use average rate for june....At the end of the calendar year, instead of revaluing their inventory on January 1st, they will revalue the inventory on dec 31 using the average rate for December.

Is the above practice correct? Can I relate the above practice to the F/S translation rule? In the F/S translation rule, Inventories are translated at historical rate.

Kindly help me resolved my problem.

Thanks,
Luz
 
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bklynboy

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I assume your functional currency is the peso which is why you are revaluing the dollar. Inventory is an asset and sghould be revalued each month using the spot rate. For the income statement, you use the monthly weighted average but you do this only on that months activity for that rate. For the US the guidance is in FAS 52.

http://www.fasb.org/cs/BlobServer?b...here=1175820909452&blobheader=application/pdf


I have never heard of doing a 6 month revalue. My company does have businesses in Mexico and also use dollars and pesos and the above is how they do it with the one caveat being that they use the rate as published by the Bank of Mexico.
 

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