Entity can account for its inventory by utilizing either perpetual process or periodic process.

Beneath perpetual process:- the entity record for just about every single motion of your inventory (i.e. in and out of your inventory)
- at any single point of time, the business is capable of recall the inventory on hand
- frequency of stock-take expected is lesser than these accounted applying periodic process

Beneath periodic process,
- just about every single motion for the inventory (i.e. in and out) will not be expected to become tracked
- the entity execute a periodic stock-take to ascertain the inventory balance
- inventory on hand can only be recalled just after the stock-take is performed
- frequency of stock-take expected is larger than these accounted applying perpetual process
- cost of sales is calculated by utilizing the following formula: Opening Stock+ Cost of Goods Produced / Acquire - Closing stock

The above summarize the distinction involving perpetual inventory process and periodic inventory process.

We received inquiries from our reader no matter if inventories ought to be translated/ revalued determined by year end rate.

IAS 21 “The Effects of Alterations in Foreign Exchange Rates” states that non-monetary product that happen to be measured with regards to historical cost within a foreign currency shall be translated working with the exchange rate in the date with the transaction. Note: inventories are non-monetary things.

Inventories are non-monetary product and need to be translated at their transaction rates if they can be denominated in foreign currencies. On the other hand, there could be situations exactly where the client could have revalued the inventory wrongly by translating the inventory determined by year-end closing rate or the typical for your year.

The auditor ought to go over this condition with corporate administration, and request management to quantify the error.