Foreign Exchange difference on raw materials imported

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Dinesh Jain (Querist)
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14 September 2009 How to account for exhange difference on raw materials imported ? What are the accounting effects and what are the AS 11 requirements in this respect ?

Prashant

Prashant (Expert)
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16 September 2009 * Profit or loss arising on the renewal or cancellation of the forward contract should be recognised as income or expense for the period. A gain or loss on forward exchange contract intended for trading or speculation should be recognised in the profit and loss statement for the period. Such gain or loss should be computed with reference to the difference between forward rate on the reporting date for the remaining maturity period of the contract and the contracted forward rate. This means that the forward contract is marked to market. For such contract, premium or discount is not recognised separately.

â€¢ Disclosure to be made for:
i) Amount of exchange difference included in Profit and Loss statement.
ii) Net exchange difference accumulated in Foreign Currency Translation Reserve.
iii) In case of reclassification of significant foreign operation, the nature of the change, the reasons for the same and its impact on the shareholders fund and
the impact on the Net Profit and Loss for each period presented.

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