Accounting treatment of foreign exchange loss on machinery
This query is : Resolved
Harsh Khakhi
(Querist)
16 September 2013
On of my client places an order for Machinery when USD rate was INR48.
Payment terms were 30% after receipt of proforma invoice, 60% after 2 months and remaining 10% when Container is unloaded in India.
My client made payments accordingly and the rate increased at each of the payment compared to INR 48 = USD 1.
I know that after 31.3.2011, any kind of Foreign exchange loss in debited to P&L A/c. by Foreign Exchange Translation Loss.
But, here the commercial invoice is not received by my client when he made payments and he got possession of machinery only after he made all the payment.
Does he need to recognize the loss in P&L A/c. or he can add to the Fixed Assets cost of the Machinery?
Thank you in advance..
Payment terms were 30% after receipt of proforma invoice, 60% after 2 months and remaining 10% when Container is unloaded in India.
My client made payments accordingly and the rate increased at each of the payment compared to INR 48 = USD 1.
I know that after 31.3.2011, any kind of Foreign exchange loss in debited to P&L A/c. by Foreign Exchange Translation Loss.
But, here the commercial invoice is not received by my client when he made payments and he got possession of machinery only after he made all the payment.
Does he need to recognize the loss in P&L A/c. or he can add to the Fixed Assets cost of the Machinery?
Thank you in advance..
Ganeshbabu K
(Expert)
23 September 2013
forex loss/gain on fixed assets should be capitalised,,it cannot be recognised in profit and loss account
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