AS - 11

AS 1704 views 4 replies

CA. Komal Savaliya

Chartered Accountant

58 Points Joined April 2008

With reference to AS - 11, I have little doubt-

Suppose, I have agreed to import goods of 100$ and made advance payment on 31.07.2009 and on that date exchange rate was Rs. 45/-. Hence I paid Rs. 4500/- for import. At the time of delivery of goods party sent me invoice of 100$ dated 4.08.2009 and exchange rate is Rs. 44/-.
In above situation which of the following two option is viable??

1) At the time of advance payment I pass entry by Rs. 4500/-, at the time of import I take purchase entry by Rs. 4400/- and recognise Exchange difference loss by Rs. 100/-

2) At the time of Advance payment as well as at the time of import, I pass entry by Rs. 4500/- directly.

In both the case my profit will be same.

Which method is viable??? Is it necessary in above situation to pass entry for exchjange difference? Is AS-11 applicable to above situation??

Please provide your valuable guidance with reason.

Thanks

Komal Savaliya

Replies (4)

CA Sudhir Maheshwari

270 Points Joined July 2009

As well as i m concerned 1st option is viable....

Initial recognition should be done at the rate of exchange prevailing on the date of transaction.(Passing entry at the time of making advance payment)

At the time of raising invoice(Subsequent recognition)i.e Pass entry with exchang rate which prevailed on the date of determination of fair value.

but this is my opinion which may be not correct in this case.....

Sudhir Maheshwari

Narayanan Balakrishnan

Chartered Accountant

98 Points Joined July 2009

There is no excahnge gain / loss in this case. Follpwing entries will be passed

For advance paayment : Supplier Dr. 4500

To Cash 4500

On booking invoice : Purchase 4500

To Supplier 4500

In this case, the advance payment to supplier is not a monetary asset since it is not realisable in cash. Non monetary items are not restated at closing rate as per AS-11