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Para 46 of as 11

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04 April 2013 what is para 46A in AS-11? Which companies apply this para? Explain me all about para46A..

21 May 2013 Accounting Standard-11 relating to “The Effects of Changes in Foreign Exchange Rates” earlier prescribed under the Companies (Accounting Standards) Rules 2006 has been now amended by the Central Government, in terms of the powers conferred on them under the Companies Act, 1956, vide Notification dated 31st March, 2009. The said Notification contains an amendment i.e. a new Paragraph-46 to be inserted in the AS-11 earlier prescribed as aforementioned. The Notification so published by the Central Government is available. It may be noted that the amendment as contained in the said Notification shall be applicable to corporates registered under the Companies Act, 1956.

As for entities other than those registered under the Companies Act, 1956, the Accounting Standard-11 as issued by the Institute shall continue to apply.

21 May 2013 Accounting Standard-11 relating to “The Effects of Changes in Foreign Exchange Rates” earlier prescribed under the Companies (Accounting Standards) Rules 2006 has been now amended by the Central Government, in terms of the powers conferred on them under the Companies Act, 1956, vide Notification dated 31st March, 2009. The said Notification contains an amendment i.e. a new Paragraph-46 to be inserted in the AS-11 earlier prescribed as aforementioned. The Notification so published by the Central Government is available. It may be noted that the amendment as contained in the said Notification shall be applicable to corporates registered under the Companies Act, 1956.

As for entities other than those registered under the Companies Act, 1956, the Accounting Standard-11 as issued by the Institute shall continue to apply.

AS 11: The Effects of Changes in Foreign Exchange Rates
Recent Developments
AMENDMENT MADE IN AS- 11 PARA 46A(1)

“MCA extends the date of applicability of treatment in respect of “AS-11” allowing the option to capitalize certain foreign exchange fluctuations” The Ministry of Corporate Affairs (generally referred to as MCA) gave the accounting fraternity two
notifications just before the New Year’s Eve as a New Year gift.
Accounting Standard 11 deals with accounting for and reporting of transactions denominated in foreign
currency. The last full-scale revision of this Standard was made by the ICAI in 2003. Since then, in the later five years and until March 2009, companies were required to record and report the amount of foreign
currency denominated receivables or loans using the exchange rate of the rupee against the foreign currency on the recording or reporting date, as applicable. Because exchange rates are unlikely to be the same on these dates, the resultant differences (foreign exchange gains/losses) at the end of each accounting period were
required to be recognized in the Profit & Loss Account.
The 2008 turmoil in global financial markets saw new lows for the INR. Pressure mounted on government from the corporates who were to book heavy losses on account of rupee depreciation. The MCA made an
attempt to modify the prevailing AS 11. The government on the last day of financial year 2008-09 came out with a notification –with the following relaxation
A. Exchange differences arising on reporting of “Long Term Foreign Currency Monetary Items” (LTFCMI) at the end of each accounting period, to the extent they are related to acquisition of
depreciable capital assets – can be added to or deducted from that asset and depreciation also calculated accordingly.
B. In case of other LTFCMI, such differences would be accumulated in a balance sheet account Foreign
Currency Monetary Item Translation Difference Account (FCMITDA) and amortized over the life of such long-term asset or liability. These treatments were initially allowed up to 31st March 2011 and later up to 31st March 2012 (vide MCA notification dated 11th May 2011). LTFCMI covered balance sheet items like long term debt, creditors and loans & advances with original life of 12 months or more. The above notification, allowed retrospective
reinstatement of accounts from December 2006, at the option of the company. A number of companies with long-term foreign currency liabilities exercised the option, in order to avoid accounting losses resulting from INR depreciation.
Over the last six months, foreign exchange markets have worsened taking INR to 50+ levels against the USD; forcing companies to declare heavy foreign exchange losses for the quarter ended September 2011.
In view of the steep depreciation of INR, the MCA has further extended the relief granted for valuation adjustment; vide Notification dated 29 December 2011, till 31st March 2020. AS 11, however, would continue to apply to short-term foreign currency cash flows (with maturity less than 1 year), which will be marked-to-market at closing rates as at quarter-end / year-end.






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