Employees of the financial service of a company sometimes have many questions about goods exporting. What is important for accountants when reflecting such transactions?
Income recognition
It should be recalled that the procedure of income reflection for export transactions in the accounting is regulated by Accounting Standards 15 “Revenue” and Accounting Standards 21 “Impact of changes in foreign exchange rates”.
Income is recognized when an asset is increased or a liability decreases, which results in an increase in equity (with the exception of capital increase due to contributions from participants of a company), provided that the income estimate can be reliably determined. Accordingly, the income on the date of receipt of the advance from a non-resident is out of the question.
The amount of prepayment (advance payment) is not recognized as income.
In addition, in accordance with para. 8 of Accounting Standards 15, income (revenue) from the sale of products (goods, other assets) is recognized if all of the following conditions are met:
· the risks and benefits associated with the ownership right of a product (goods, other assets) are transferred to the buyer;
· the company does not continue to manage and control the sold products (goods, other assets);
· the amount of income (revenue) can be reliably determined;
· there is confidence that the transaction will result in an increase in the economic benefits of the company, and the costs associated with this transaction can be reliably determined.
Exchange differences
In case of export, exchange differences arise as in all other transactions with foreign currency. The definition of exchange differences from the translation of transactions denominated in foreign currency, debt and foreign currency is carried out in accordance with Accounting Standards 21.
Companies keep accounting and financial statements in the monetary unit of Ukraine. That is, if the settlements for export transactions are carried out in foreign currency, when such transactions are reflected in the accounting, foreign currency is to be converted into UAH.
Settlements in foreign currency are reflected in the accounting through its recalculation in UAH. Such requirements are set out in Accounting Standards 21. Thus, in accordance with para. 5 of Accounting Standards 21, transactions in foreign currency at initial recognition are reflected in the reporting currency (in UAH) through recalculation of the amount in foreign currency at the beginning of the date of transaction implementation.
Also, transactions in cashless settlements in foreign currency are permitted to be reflected in the amount specified in the bank’s documents, taking into account peculiarities of the bank’s use of the exchange rate on the date of the transaction. The main thing is that this does not contradict the requirements of tax and customs legislation in terms of the application of the exchange rate.
The procedure of reflection
The order of reflection of export transactions in the accounting depends on the event occurred first – transfer of goods or receipt of prepayment.
If the first event is the supply of goods, the supplier should reflect the income in the cost rate of the goods sold at the official NBU exchange rate of hryvnia against foreign currency at that date. Subsequently, this monetary debt is transferred to the balance sheet date and/or at the time of repayment by the non-resident counterparty. At the same time, exchange rate differences obtained under such transactions are calculated. Such exchange differences are reflected either in income (if the difference is positive) or in expenses (if the difference is negative).
If the first event is a prepayment, then at the time of receipt, the supplier does not reflect the income from such a transaction. The debt to the counterparty-non-resident is not recalculated at the balance sheet date, as it is a non-monetary item. Such revenues will be reflected at the moment of transfer to the buyer of the ownership of the goods, but at the official NBU exchange rate of hryvnia to foreign currency at the date of receipt of prepayment.
