COGS translation under Temporal Method

CFA Level II
#1

I was watching the Schweser Videos for the Temporal method transalation where Jon Bone makes an adjustment for the rate to be used for COGS. However, in the material, the historic rate is applied.

The transformation used is:

Beginning Inventory + Purchases - Ending Inventory = COGS

Using the historic rates for BI & Inventory and Avg Rate for Purchases, a ‘plug’ value for COGS translation rate is arrived at.

What is the correct rate to be used for the COGS translation?

#2

COGS is historical

#3

Generally, if you don’t know COGS it can be determined with a plug via that formula.

Temporal/Current method combined with FIFO/LIFO translations is an unmitigated disaster

#4

agreed. there’s an EOC item set in SS24 that combines the LIFO/FIFO vs. temp/current method and they’re a pain in the ass. but COGS is historical under Temporal method unless otherwise noted.