Tally

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More


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


Tags :



Category Accounts, Other Articles by - CA Aman Agrawal 



Comments


update