ICDS VI : Effects of Changes in Foreign Exchange Rates

Foreign exchange accounting: rules for translating transactions, recognising exchange differences, and treating forward contracts for tax income computation.

ICDS VI prescribes recognition and translation rules for foreign currency transactions, classifying items as monetary or non monetary and requiring initial recording at transaction date rate (or period average where appropriate). Monetary items are translated at closing rate with a realistic rate exception; non monetary items are translated at transaction date rate except inventory at net realisable value. Exchange differences on monetary items are recognised in the relevant previous year, while exchange differences on non monetary year end conversions are not recognised for that year. Forward contract premiums or discounts are amortised over the contract period and specific recognition rules apply for trading, speculation and hedging cases.