Share capital currency different from reporting currency

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S.Neeraja (Querist)
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24 March 2010 Hi,

This is a practical problem I am facing while preparing the financial statements of a foreign entity. "A" company received share application money of USD 30,000 which is inclusive of share capital and share premium in March 2009 in its USD bank account. The allotment of shares was done in April 2009. The share certificate states that the issued shares are 1,000 shares of EUR 1 each and a premium of EUR 23 per share. The USD/EUR exchange rate in March 2009 was 1.25 and in April 2009 is 1.50. The reporting currency is USD. Please suggest me on 2nd entry:

1st journal entry: (On receiving money in March 2009)
Bank Dr USD 30,000
To Share application money A/C USD 30,000

2nd journal entry:(On allotment in April 2009)
Share application money A/C Dr USD 30,000
Currency exchange results A/C Dr USD 6,000
To Share capital A/C USD 1,500(1,000*EUR 1*1.50)
To Share premium A/C USD 34,500 (1,000*EUR 23*1.50)

Do I need to recognize the currency exchange results on allotment of shares. Kindly advice.

Madhusudan Bohra

Madhusudan Bohra (Expert)
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26 March 2010 Since reporting currency is USD, I do not feel that you should account for currency exchange.

S.Neeraja

S.Neeraja (Querist)
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26 March 2010 Thank you for replying.Can we get any supportings to substantiate this?

Madhusudan Bohra

Madhusudan Bohra (Expert)
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26 March 2010 Refer IAS 21.
Since presentation currency and the currency in which transaction is made are same, there is no question of exchange rate diff.

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