Could someone help me understanding why you would have a higher profit margin in an inflationary scenario when you use current rate method instead of the translation method (and FIFO)
Thanks for your help
Peter
First, whats being inflated? The reporting currency or the local currency?
Second, the answer I believe has to do with how COGS gets calculated. I believe COGS is a plug value. You solve for COGS using inventory (beg & end) and purchases. It all uses historical rates for temporal, so if you have FIFO, than your inventory is the most recent purchase which is current rate while your purchases is likely your historical rate (unless the problem said purchases were made evenly throughout the year, which you would use average rate).