ACCOUNTING FOR DIFFERENCE IN FOREIGN EXCHANGE RATES

[S.C. WADHWA]

A Company had given advance of USD 5000 towards purchase of machinery from China.

Advance is given dt. 12/02/14.

Remaining payment of USD 15000 is made on 15/04/14 and machinery is imported dt. 14/05/14.

Please advice how foreign exchange difference will be dealt with as on 31/03/14.

[YAGAY and SUN]

Dear S.C. Wadhwa,

Please check AS - 11 in this regard.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Accounting Standard 11: treatment of foreign exchange differences governs recognition for advance payments and subsequent import transactions.
Accounting treatment of foreign exchange differences on an advance payment for imported machinery is governed by Accounting Standard 11. Apply AS 11 principles to determine measurement, recognition and whether exchange differences up to the balance sheet date are recognised in profit or loss or adjusted to the cost of the related asset, and to satisfy AS 11 disclosure requirements for transactions settled after the reporting date.