Friday, July 14, 2017

ICDS 6 vs. AS 11

The corresponding AS to ICDS 6 'The Effects of Changes in Foreign Exchange Rate' is AS 11 'The Effects of Change in Foreign Exchange Rate'.

Point of Difference

AS - 11
ICDS - 6
Revenue monetary items
(receivables/payables/bank balance,etc)

Reported using closing rate.
Exchange difference recognised in P&L a/c.
Converted to reporting currency using closing rate.
Recognised as income or expense subject to provisions of Rule115.
Revenue non monetary item (like inventory)

Carried at historical cost - exchange rate on the date of transaction.
Carried at fair value - exchange rate that existed when the value was determined i.e. closing rate.
Carried at historical cost - exchange rate at the date of transaction 
Carried at fair value - exchange rate at the date of transaction
Capital monetary items

Requires recognition in P&L.

Option of capitalization available -exchange differences arising out of long term foreign currency monetary items (LTFCMI)shall be either adjusted to capital asset or accumulated in FCMITDA.
Requires recognition in P&L subject to provisions of sec 43A.
No such option available.
Foreign Operations Foreign operation is a subsidiary, associate, joint venture or branch of the reporting enterprice, the activities of which ae based or conducted in a country other than the country of the reporting enterprise. It is a branch, by whatever name called, of that person, the activities of which are based or conducted in a country other than India.
Non Integral Foreign Operation

Exchange difference on translating monetary items ---> Foreign Currency Translation Reserve Exchange difference on translating assets and liabilities both monetary and non monetary ---> recognised as income or expense in that previous year.
Forward Exchange Contract
(trading speculation, firm commitment, highly probable forecast)

Marked to market at each balance sheet date - profit or loss arising thereoff recognised in P&L a/c.
No Amortisation of premium or discount.
Premium ,discounts or exchange difference on contracts be recognised at the time of settlement only.