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AS 11 Notes

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25 views

AS 11 Notes

Uploaded by

Robert Lalrinfela
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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AS 11 The effects of changes in Foreign Exchange Rates

Foreign Currency Foreign Exchange


Foreign Operations
Transactions Contracts

Any Transaction
denominated in foreign Types of Foreign Not intended for trading
Intended for trading
currency Operations ; purpose or speculation
purpose or speculation
1. Integral Foreign (i.e. Hedging)
Operations
(Dependent Branches) Premium or discount arising
Recognition ( i.e. when Measurement (i.e. at 2. Non-Integral Foreign on the
will I record in the what value will I record Operations contract is ignored Premium or discount
books) the same? (Independent Branches) At each BS date the contract arising at the
is marked to market and loss / Inception of such
gain is recognized in P&L forward contract
should be amortized
Also, The profit or loss arising as income or expense
Measure using
Recognize on “Date of between the Selling price and over the life of the
“exchange rate on Initial Recognition
transaction” Purchase price of the contract contract
date of transaction”
is recognised.

* If the transaction is not


Likely to be settled at closing
On Balance Sheet Measure using rate subsequent recognition
Date Closing Rate * Subsequent Exchange difference must be at the ER at which the
Recognition arising on Subsequent transaction is likely to be
Measure using (Monetary Items Recognition -> settled
On Settlement date “exchange rate on Only) CHARGED TO P&L
date of settlement”
AS 11
CA CS Karthik Manikonda (75501 37279)
AS 11 The effects of changes in Foreign Exchange Rates

Important Definitions

Exchange rate
Home currency per unit of foreign currency
(ER)
Transitional Provisions :
Whenever there is a long term foreign currency borrowing for the
Home Currency Currency in which FS are prepared purpose of a depreciable asset the exchange gain/loss on such
borrowing can either be;
1. Charged to P&l
or
Foreign currency Other than Reporting currency 2. Adjusted with the cost of the asset.

Option once exercised is IRRECOVECABLE.


Closing rate ER on Balance sheet date Period of borrowing : 6/12/07 to 31/3/20

In other cases
( i.e. Borrowing not used for Depreciable asset ) then the exchange
Average Rate (Closing rate + Opening rate) / 2 difference can be accumulated in “ foreign currency monetary item
translation difference (FCMITD) Account.
Are money held and assets and liabilities to
be received or paid in fixed or
Monetary Items determinable amounts of money.
(Trade receivables , Trade payables , BR/BP
, Bank loan etc. )

Assets and liabilities than monetary items


Non-Monetary
(E.g. : FA, Investments, Inventories) Carried
items
at either historical Value (or) Fair value
CA CS Karthik Manikonda
(75501 37279)

AS 11

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