Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

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

Basis
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.

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