Conversation of ecb in to equity
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
13 February 2013
What is the treatment of gain or loss on conversation of External commercial Borrowing in to Equity??
13 February 2013
Normally ECBs are raised with a fixed conversion option in terms of dollar and no of shares.
At every balance sheet date, ECBs are valued at closing spot rate as per AS 11 (monetary items, as it is not manadatorily convertible).
Thus at the time of conversion, there will be exchange variation impact because of the difference between last reporting date and conversion date. This difference will go to income statement.
Now the liability in INR will get transferred into Equity share capital and share premium. You may find that if the conversion would have happend on day 1, the share premium would have been X amount, however due to chnages in exchange rate, the share premium will now by Y amount.
Do revert back if there is any clarification.
At every balance sheet date, ECBs are valued at closing spot rate as per AS 11 (monetary items, as it is not manadatorily convertible).
Thus at the time of conversion, there will be exchange variation impact because of the difference between last reporting date and conversion date. This difference will go to income statement.
Now the liability in INR will get transferred into Equity share capital and share premium. You may find that if the conversion would have happend on day 1, the share premium would have been X amount, however due to chnages in exchange rate, the share premium will now by Y amount.
Do revert back if there is any clarification.
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