Foreign exchange rate variation in purchase of fixed assets.

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Aftab Alam (Querist)
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23 November 2011 HI,

I need the exact accounting treatment of the following case in respect of forex rate difference:

An asset was purchased for 1000 USD on 10/5/2010 (rate of excahnge 1 USD = rs 45 as per bill of entry).

case I: when paymen is made to the party on 1/1/2011 the rate of USD was INR 48.00

case II: when paymen is made to the party on 1/1/2011 the rate of USD was INR 43.00

case III: when paymen is made to the party in the next financila year i.e.15/4/2011 the rate of USD was INR 43.00

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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23 November 2011 In all the cases, the exchange difference(gain/loss) shall be credited/debited to the P&L account.

It will NOT BE ADDED TO THE COST OF THE ASSET.

CA Navin Jain

CA Navin Jain (Expert)
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23 November 2011 yes, before 31.3.2011 it was option that you can transfer to exchange difference to either of profit n loss a/c or directly to fixed assets as per companies accounting standard amendment rule-2009.

After 31.03.2011. all exchange difference to be transferred to profit n loss account only.

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Sumit Borarh

Sumit Borarh (Expert)
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03 February 2015 The Unit is constructing its new plant and it is in progress at year end. In financials it appears as WIP.

1. What shall be the treatment of rate difference arising on 31st March?

2. What shall be treatment in next financial year while making payment in case the plant is in operation on the date of payment?

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