As 11: forex gain/loss adjusted to sales...!

AS 1925 views 2 replies

Hello friends...

Just had a doubt worth your attention....

As an exporter of goods, I book my Sales on consignment basis as per the forex rate as on date.

I receive payment in foreign currency in my EEFC account been maintained with Indian bank. Later I transfer those foreign currencies into Indian Rupee at the rate prevailing on the date of such conversion.

On such conversion, I alter my Sales figure accordingly to match it with realised amount. Thus there's no forex gain/loss been booked at all on Sales.

I know this is against the normal practice. But can any paragraph of  AS 11 specifically be quoted which would term the said practice wrong? I mean is it legally incorrect?

Replies (2)

As per AS 11 para 8

A foreign currency transaction should be initially recorded at Transaction rate existed on the date of transaction

As per Para 13 & 14 of AS 11 any Exchange differece arising (difference between rate on initial recognition & settlement date ) should be transfered to P&L a/c

no capitalization of Exchange difference is allowed as per AS 11

foreign exchange difference arising on loan taken for acquisition of Capital asset can be capitalized as per companies accounting standards.. but no such provision in AS 11

 

Hitesh, the sales have to be recorded based on the exchange rate prevailing on the date of sale. Any exchange differences arising on the settlement of debtors needs to be considered in the income statement below gross profit.

thanks


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