Branch A of ABC Limited. Its functional currency is USD. However, Branch A is required by law to present its financial statements in INR as presentation currency of ABC limited is INR, which is the local currency of the country in which it operates. Branch A has a 31 March financial year-end.
The exchange rates:
- at 31 March 20X1 and 31 March 20X2 are $1 = INR 65.00 & $1 = INR 66.00 respectively.
- weighted average rate for the year ended 31 March 20X2 is $1 = INR 65.50.
Entity A records all its transactions in its functional currency in accordance with IND-AS. The statement of comprehensive income and an extract from the statement of changes in equity for the year ended 31 March 20X2 prepared in the functional currency are as follows:
Statement of comprehensive income for the year ended 31 March 20X2
|
Particulars |
20X2 (USD) |
|
Revenue |
14,61,140 |
|
Cost of Sales |
(11,39,690) |
|
Gross Profit |
3,21,450 |
|
Distribution costs |
(1,500) |
|
Administrative expenses |
(90,000) |
|
Other expenses |
(10,000) |
|
Finance costs |
(30,000) |
|
Profit before Tax |
1,89,950 |
|
Income Tax |
(44,950) |
|
Profit after Tax |
1,45,000 |
Notes:
- The weighted average exchange rate for the year ended 31 March 20X1 is $1= INR 64.50.
- At 1 April 20X1 a cumulative gain of INR 21,50,000 has been recognized in Other Comprehensive Income, which is due to translation of entity’s financial statements into INR at previous periods.
- Retained earnings at 1 April 20X1 were INR 1,61,15,000.
The statements of financial position at 31 March 20X2 and 20X1 are as follows:
|
20X2 (USD) |
20X1 (USD) |
||
|
Property plant and Equipment |
8,50,000 |
9,00,000 |
|
|
Inventory |
80,000 |
30,000 |
|
|
Trade Receivable |
1,20,000 |
50,000 |
|
|
Cash |
50,000 |
30,000 |
|
|
Total Assets |
11,00,000 |
10,10,000 |
|
|
Trade and Other Payables |
55,000 |
30,000 |
|
|
Bank Overdraft |
50,000 |
1,00,000 |
|
|
Loan |
5,00,000 |
5,00,000 |
|
|
Total Liabilities |
6,05,000 |
6,30,000 |
|
|
Retained Earnings |
3,50,000 |
3,00,000 |
|
|
Profit for the Year |
1,45,000 |
80,000 |
|
|
Total Equity |
4,95,000 |
3,80,000 |
|
|
Total liabilities and equity |
11,00,000 |
10,10,000 |
Statement of financial position at 31 March 20X2 (and 20X1) translated into INR:
|
Particulars |
20X2 |
20X1 |
||||
|
USD |
Rate(a) |
INR |
USD |
Rate(a) |
INR |
|
|
Property plant and Equipment |
8,50,000 |
66.00 |
5,61,00,000 |
9,00,000 |
65.00 |
5,85,00,000 |
|
Inventory |
80,000 |
66.00 |
52,80,000 |
3,000 |
65.00 |
1,95,000 |
|
Trade Receivable |
1,20,000 |
66.00 |
79,20,000 |
5,000 |
65.00 |
3,25,000 |
|
Cash |
50,000 |
66.00 |
33,00,000 |
3,000 |
65.00 |
1,95,000 |
|
Total Assets |
11,00,000 |
7,26,00,000 |
9,11,000 |
5,92,15,000 |
||
|
Trade and Other Payables |
55,000 |
66.00 |
36,30,000 |
30,000 |
65.00 |
19,50,000 |
|
Bank Overdraft |
50,000 |
66.00 |
33,00,000 |
1,00,000 |
65.00 |
65,00,000 |
|
Loan |
5,00,000 |
66.00 |
3,30,00,000 |
5,00,000 |
65.00 |
3,25,00,000 |
|
Total Liabilities |
6,05,000 |
3,99,30,000 |
6,30,000 |
4,09,50,000 |
||
|
Retained Earnings(b) |
4,95,000 |
2,56,12,500 |
3,80,000 |
1,61,15,000 |
||
|
OCI |
NA |
70,57,500 |
NA |
21,50,000 |
||
|
Total Equity |
4,95,000 |
3,26,70,000 |
3,80,000 |
1,82,65,000 |
||
|
Total liabilities and equity |
11,00,000 |
7,26,00,000 |
10,10,000 |
5,92,15,000 |
||
a) All assets and liabilities are translated at the closing exchange rate, which is $1 = INR 65.00 on 31 March 20X1 and $1 = INR 66.00 on 31 March 20X2. No Share capital available at branch level.
(b) Retained earnings at 31 December 20X2 and 31 December 20X1:
|
Particulars |
20X2 |
20X1 |
|
INR |
INR |
|
|
Opening Retained Earning |
1,61,15,000 |
1,09,55,000 |
|
Profit for the Year |
94,97,500 |
51,60,000 |
|
Closing Retained Earning |
2,56,12,500 |
1,61,15,000 |
(c) Profit for 20X1 was translated at a weighted average rate $1= INR 64.50, i.e. $ 8000 * 64.50 = INR 51,60,000, Profit for 20X2 was translated at a weighted average rate $1= INR 65.50, i.e. $ 1,45,000 * 65.50 = INR 94,97,500.
Statement of comprehensive income for the year ended 31 March 20X2 translated into INR:
|
Particulars |
USD |
Rate |
INR |
|
Revenue |
14,61,140 |
65.50 |
9,57,04,670 |
|
Cost of Sales |
(11,39,690) |
65.50 |
(7,46,49,695) |
|
Gross Profit |
3,21,450 |
2,10,54,975 |
|
|
Distribution costs |
(1,500) |
65.50 |
(98,250) |
|
Administrative expenses |
(90,000) |
65.50 |
(58,95,000) |
|
Other expenses |
(10,000) |
65.50 |
(6,55,000) |
|
Finance costs |
(30,000) |
65.50 |
(19,65,000) |
|
Profit before Tax |
1,89,950 |
1,24,41,725 |
|
|
Income Tax |
(44,950) |
65.50 |
(29,44,225) |
|
Profit after Tax |
1,45,000 |
94,97,500 |
|
|
Other Comprehensive Income Exchange difference on translating from USD to INR |
49,07,500 |
||
|
Total comprehensive Income |
1,44,05,000 |
||
|
Statement of changes in equity for the year ended 31 March 20X2 translated into INR: |
|||
|
Particulars |
Retained Earning |
OCI |
Total |
|
Balance at 31 March 20X1 |
1,61,15,000 |
21,50,000 |
1,82,65,000 |
|
Profit for the Year |
94,97,500 |
- |
1,44,05,000 |
|
Exchange Difference |
- |
49,07,500 |
- |
|
Balance at 31 March 20X2 |
2,56,12,500 |
70,57,500 |
3,26,70,000 |
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