PO and Invoice exchange rate differences

[M123]

Hi All,

If a purchase order is raised in a foreign currency there will definitely be an exchange rate difference between the Invoice amount and the PO amount(functional currency).So that the difference is charged to the PO rate variance gain or loss account.

But my question is,since the inventory is updated based on the PO price,there can be a under or over valuation of the inventory.Am I correct??

So please explain how i can accommodate that gain or loss in to inventory valuation?

Thanx
M123