Does anyone have any experience of working with a company that has accounts for both Euros and Stirling. How and when should exchange rates be applied for bookkeeping/accounts purposes. Lots of question and probably too many to list here so let me know if anyone has any experience and then I can try and work my way around my questions.
best approach on this one is to point you in the right general direction rather than try to give an answer.
Take a look at FRS23, the effect of exchange rates on foreign currency transactions which details when to apply conversion rates and the effective rate to apply.
Besides the actual reporting standard a good book that covers this is the Kaplan study text for ACCA paper P2.
Hope that this helps as a starting point.
Shaun.
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Shaun
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In addition to Shaun's comments. I tend to use the end of month spot rate. Of course there will always be differences on the ledger, eg you sell something in sterling and you get paid in Euros. Once it hits the bank account there will most likely be a difference. This difference I would then post to an 'exchange rate variance' account.
That at least heads me in the right general direction, I've been doing some research on it using info supplied and could do with 2nd opinions please.
Can you mix the rules as long as you apply the mix consistently?
Brief description is, bear with me because this is not easy to explain - company runs a Euro account and a Stirling account with business accounts completed as stirling. Most of the income comes into the Euro account with cost then applied back out of that account as Euros, sums are then transferred out on a regular basis to the Stirling account to cover all Stirling costs. If a spot rate is applied to each transaction within the Euro account for bookkeeping/accounts purposes this creates a variance that never really happened as money came in and went out as Euros so could we apply an average rate to these transactions and then a spot rate to money being moved into the Stirling account. If my thinking is on the right track could the average rate change month on month to allow for monthly management accounts. I am also assuming that these are International Accountancy Standards and would therefore be correct for the Channel Isles.
