Having a musing, wondered how other folk deal with this...
If a client invoices say £1000 to a foreign business but gets paid perhaps £990 because of an exchange rate difference - would you adjust the sales figure, or, show it as something like "foreign currency gains and losses" or "exchange rate differences", within overheads?
Also, assuming the latter, does any adjustment need to be made on the tax comp? I have it my head that I might need to make an adjustment (perhaps to take it out of trading, like I would bank interest receivable) But I have no idea where this notion comes from!!
Its Friday, so I should be thinking about beer o'clock.. help me out, so I can refocus my thoughts to something more interesting!! :))
Hi Michelle I used to see Annual Accounts in my Corporate finance days with Foreign currency gains/losses reported on a separate line in the accounts, but the rules covering it, sorry I have no idea, but interested to learn!
Care of sneaky Bank charges, rather than exchange difference! I have one that comes in from Singapore (but in sterling) and HSBC provide an advice of receipt, showing the amount transferred from abroad and the amount received. There is always a £5 or £15 difference (depending on initial value from abroad) which is CLEARLY HSBC charges although they dont give the charge breakdown on the advice - had one or two rows about that one!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I wokld not reduce the sales invoice amount to ensure the accounts show sales on a gross basis. I would not deduct forex differences as a non trading loan relationship as the amount has occurred as part of normal trading activities as trade debtors are an integral part of the trade and not investment income.
I do it a bit long winded - I clear the full invoice off and then do a payment from the bank to foreign currency charges to cover that part then when I do the reconciliation on the bank the two together come to the amount in the bank statement.
I use sage and post it as a T2 entry with the fees
Not sure that it would impact on the tax comp as you only adjust for interest received
I will be showing FCGL as an expense (or minus expense) and making no adjustment. I was confusing the adjustment with something else. Thanks for your thoughts :)
