EEFC Account- Accounting Treatment

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Dear All, As per AS 11, ICAI Compendium of Opinions, Vol XXIX,all transactions whether involving receipt of foreign currency or payment in foreign currency, should be recorded at the exchange rate as on date of transaction. EEFC accounts should be recorded at the exchange rate on the date of transaction. The Company can not account for the payments from EEFC accounts at the exchange rates applicable to receipts without considering the exchange rates prevailing on the dates of payments from the accounts.

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My query is as under. Our organisations have EEFC account. If We have made export of 100 USD and We are receiving 100 USD at a time. Against on same day We have import payment from EEFC too, amounting to 40 USD. For E.g. Buy Rate 70, Sell Rate 72 We received from Bank net payment advise for 60 USD*72=₹ 4320. Now, if as per AS respective rates are taken in which bank EEFC account is maintained, Following entries are passed. 100 USD*72= ₹ 7200 Receipt 60 USD*70= ₹ 4200 Payment Net Receipt ₹ 3000 However as per payment advise it is ₹ 4320 as with same USD rate payment is knocked off. So whether should be record gain of ₹ 1320 (as per Accounting Standard ₹ 3000 vs. Actual Received ₹ 4320).? Please guide. Also EEFC account needs to be shown separately in Balance Sheet under Cash and Bank balance?

AI Summary

Foreign Currency Transactions Must Record at Transaction Date Rate Under AS 11; Report Gains as Exchange Fluctuations A discussion on the accounting treatment of Exchange Earners' Foreign Currency (EEFC) accounts highlights that transactions involving foreign currency should be recorded at the exchange rate on the transaction date, as per AS 11. A query was raised about recording a net receipt of 3,000 versus an actual receipt of 4,320, questioning if a gain of 1,320 should be recorded. The response clarified that this should be treated as a foreign exchange fluctuation, reported in the balance sheet, and noted in the accounts. EEFC accounts should be separately shown under cash and bank balances.