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Apologies I think Lemontrees & KPMG are correct. Hedging does not appear to be applicable here although it could be advised as a risk mitigator.
I got that wrong !
Does this mean that you cannot re-value foreign currency non-monetary assets held at historical cost ? Ambiguous..
The retail division was worth more by year end so the entity could elect to re-value should they wish. If they re-value you take the date of revaluation which was year end as the exchange rate. I don’t think it was clear from the question whether they had re-valued or not so you were probably ok to say historical cost. so long as you explained all this.
I think it was trying to get you to suggesting Hedging the asset and the loan since they were in the same currency but only touched on this saying it was possible and it would smooth the effects of any swings in currency
Hi all,
How should you treat the sale of inventory in Q1 with the option to buy back at a much lower price ? I guessed you should presume the company will certainly buy it back at some stage.
I reversed the sale and adjusted the inventory to its FV at year end.
Not sure if I should have kept it at Cost or FV ? Usually Inventory stays at Cost but in this case it has left the business …
Also not sure if I was meant to account for a Financing agreement i.e the difference between the sales price and the buy back price because this is the substance of the arrangement.
Pretty sure what I did was either wrong or incomplete. Would be nice to know.
Thanks