AS 16 - Borrwoing Cost of FC Loan

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Jay Chakraborty (Querist)
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14 August 2010 One PSU has received FC Loan out of an international agreement for developmental purpose. In the notes to accounts, it said that it had not considered forex diff. in borrowing cost due to non-confirmation of balance by the foreign lender? Is this treatment correct? Interest had been calculated considering day balances?

CA SMR

CA SMR (Expert)
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14 August 2010 The FC loan should have been revalued at the forex rate prevailing at the date of Balance Sheet and accordingly FOREX gain or loss should have been recognised.(AS 11)

The question "Interest had been calculated considering day balances?" is not clear.
6. This Statement(AS 11) does not deal with exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to interest costs (see paragraph
4(e) of AS 16, Borrowing Costs).

Lalit Maheshwari

Lalit Maheshwari (Expert)
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16 August 2010 Dear Jay
Resatement of Foriegen curency debt does not depand upone confirmation of lender

FC balance have to be reasted at rate prevaling on balance sheet date

Consequent exchange variation is charged to revnue as per As 11.Excahnge variation to the extent of interest cost is capitalized AS 16 for this purpose pls refer Acounting Sandard Interpreation (ASI)10

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