@Tut, I think it’s best I explain what I have done so far, and arrive at the issue I’m facing.
Some background info first:
- My financial year follows the calendar year,
- My base currency in Manager is USD, as required by IFRS’ functional currency assessment,
- My presentation currency is also USD (for convenience), and
- My local tax authority bills me in SGD (my local currency).
- Exchange rates are updated into Manager, on the last day of every month.
- SGD per USD on 31 Dec 2017 was 1.3366, and
- the average SGD per USD for the whole financial period (i.e. Jan '17 to Dec’17) was 1.36756
In the year 2018, I received my corporate tax bill of SGD 6,647.75 for the year 2017.
To recognize the tax expense in the correct period, i.e. year 2017, I passed a journal entry on 31 Dec 2017 as such:
Dr: Corporate income tax (P/L - expense) SGD 6,647.75
Cr. Provision for corporate income tax (B/S - liability) SGD 6,647.75
At year-end balance sheet date, i.e. 31 December 2017, the balance sheet would show a tax payable of USD 4,973.63 (computation: SGD 6,647.75 divided by month-end rate of 1.3366).
So here is where the problem begins. My income tax expense for the year 2017 is USD 4,857.69, but I am not in compliant with IAS 21 which requires me to use the average rate of 1.36756. So when I prepare my statutory financial statement, the tax expense is USD 4,861.03 (computation: SGD 6,647.75 divided by month-end rate of 1.36756).
So here is what I’m requesting - at the point of the recording the journal, if I can specify a specific exchange rate to use, that is, in my case, the average rate, I would not have any variance between Manager and my statutory FS.
One work-around would be that I record the tax expense in USD right away using the average rate. However, when I pay off the tax in 2018 from my SGD account, I can’t specifically mention the equivalent in USD. So I have difficulty zero-rising the balance after settlement.