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Foreign Exchange Fluctuation

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(Querist)
14 June 2009 Could anyone clarify me the nature of loss on account of Foregn Exchange Fluctuation? Is it operational exp or financial exp? Does the nature of the exp change, if the loss is on account of booking of forward contract for sale of services overseas?
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CA Nitin Wadhwani

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CA Nitin Wadhwani (Expert)
14 June 2009 In my opinion, it is shown a operational expense.
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Parveen Bansal

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Parveen Bansal (Expert)
17 June 2009 Loss on account of foreign exchange fluctuation can arise:
a. on cancellation of forward cover / option contracts.
b. on conversion of financial statements for preparing consolidated financial statements.
c. Difference between foreign exchange rate prevailing on transaction date and payment date.

Nature of loss and situation are required to be correlated to decide nature of expense of foreign exchange fluctuation.
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