Valuing Stock in Reports: Dollars, Soums and Exchange-Rate Dates

Goods in Uzbekistan are bought in soums, the report reaches you in the Gulf in dollars, and between the two sits an exchange rate that moves from one week to the next. So one stock, in which not a single carton has changed, can show three different totals depending on the date used for conversion. A reader who does not know this asks, reasonably, where the difference went. In most cases the answer is that it went nowhere: it is a difference in the arithmetic, not on the shelves. This article is about how to write the figure so that it can be checked.

Three dates and three totals

The value of stock can be converted from soums to dollars at the exchange rate of three different dates:

• The purchase date: gives what you paid at the time, if the dollar cost is your reference.
• The count date: gives the picture on the day of the visit.
• The report or balance sheet date: gives the value at the time the document is prepared that shareholders will read.

Each of these is legitimate, but mixing dates in one document without saying so is what causes confusion. The answer also depends on the basis of valuation, that is, whether stock is measured at cost or at its expected selling price. That choice is an accounting decision for your accountant. Some goods, especially imported ones, may be priced locally in dollars or at prices that follow the dollar. For these the effect of a rate change differs, and the accountant should say how each kind is treated.

A worked example (conditional figures)

The company bought stock for 250,000,000 soums. For illustration only we assume three exchange rates, which are not real rates: 12,000, 12,500 and 13,000 soums to the dollar. The value in dollars is then:

1. At 12,000: about 20,833 dollars.
2. At 12,500: 20,000 dollars.
3. At 13,000: about 19,231 dollars.

The difference between the highest and the lowest is 1,602 dollars, about 8 percent of the middle figure, while the goods are the same and the soums paid for them are the same. A reader who does not know that the three numbers come from different dates may think that 1,602 dollars disappeared from the warehouse, and may launch an investigation with no reason.

What to write beside every figure

When a page contains a financial value, the reader should find on it:

• The original currency of the prices in the books, and the currency in which the report is shown.
• The exchange rate used, its date and its source. Ask your accountant which rate your books use, and use the same one so that the figures do not drift apart.
• The basis of valuation: cost, or something else.
• Whether the figure is a cost (what was actually paid) or an estimate of the selling price; the two are not mixed in one column.
• The date of the count and the date of the books against which it was compared.

Two columns and rounding

Show two adjacent columns, one in the original currency as in the books and the other in the report currency. Put the exchange rate in a single named cell to which all rows refer, so that any reader can change the cell and recalculate. Do not convert each row at a different rate. Mind the rounding too: the total of rows each rounded separately can differ by a dollar or two from the rounding of the total. That is not an error but an arithmetic effect, and it is wise to state the rounding rule in a short note and have the accountant sign off the rate.

What a count can and cannot do

A count establishes quantities, condition and location. Setting the value, deciding which exchange rate to adopt, whether slow stock should be written down and how currency differences are treated in the accounts are accounting matters for your accountant or auditor. The same goes for moving money between the two countries and the rules on foreign currency: they are for a local specialist and cannot be inferred from a stock report. All exchange rates in this article are conditional.

In short

The difference between totals is often a difference of date and not of goods. State the currency, the rate, the date and the source beside every figure. In its reports WarehouseDepo keeps the quantities it counted apart from the values that you work out with your accountant, and shows the tables in the currency of your books so that they are easy to check and convert.