Foreign currecncy loan

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murali up (Querist)

03 December 2014 Dear All

My query is regarding Foreign Currency loan transactions & balance in FC loan a.c
1. i converted each transaction in dollar to indian Rupee using transaction days exchange rate -- is this right
2. closing balance in Dollar i converted in to INR. The difference in existing balance & the balance by converting Dollar closing balance recognised as profit/loss as the cas may be.--- Is this right ?

Shoul we recognise the differnce between Foreign Curreny loan & the equivalent indian rupee as Profit /loss on exchange difference on CLOSING BALANCE

Please advise

Thanks in advane

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

03 December 2014 A foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
You are right for query No.1.
Query 2 recognize the difference as profit/loss on exchange difference on closing balance on the balance sheet date.

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