Fccb issue

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Nirav Shah (Querist)

11 July 2012 If company has issue Foreign Currency Convertible Bond then what is the accounting entry for that n weather we have to treat it as mark to market at the end of the year???If yes that its called foreign currency fluctuation Dr in P&L account??? expert pl help

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)

11 July 2012 Under Indian GAAP, FCCB is a foreign currency monetary liability.

It has to be mark to market only for the forex part and not for the value.

Many companies in India have FCCBs accounted under Indian GAAP. eg Essar Oil, R Com.

Sterlite and Sesa Goa also have FCCBs, however they seem to have applied AS 30 for that and have valued the embedded option in line with IFRS.

Nirav Shah

Nirav Shah (Querist)

12 July 2012 thanxs sir but what is the meaning of mark to market only for the forex part we dont have to book any currency fluctuation in that??? n what is the accounting entry in both the case under GAAP & under AS-30

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)

12 July 2012 yes, book only currency flutuation on full dollar value juts like any other foreign currency liability.

Under Ind AS 39, the conversion option is considered is considered equity in nature and thus would require accounting as Compound Instrument. ie Split Debt and Equity and then MTM only debt portion for forex fluctuation.

Under AS 30 & IAS 39, the conversion option being in INR and bond issued in dollar, is NOT considered equity but an embedded derivative. It is thus fair valued at every balance sheet date. This Fair value adjustment will inlcude imapct of current equity prices as well as currency exchange of the instrument. Refer Sterlite balance sheet which has applied AS 30 is its financial statements.

Regards,
Sanjay Chauhan

Nirav Shah

Nirav Shah (Querist)

13 July 2012 thank you sir ..

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