Foreign Branch

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CA Harit Kapoor

Chartered Accountant

43 Points Posted on 16 February 2010

hii...

suppose a foreign branch had plant amounting to $120000(excluding depreciation) at the end of the year....and the rate of depreciation is 10% p.a......now trial balance has to be prepared after incorporating the adjustment of depreciation.........the rate of depreciation was rs 38 to one $ when the plant was purchased..........and the opening...closing and average rate are rs 39, 41 and 40 respectively.....now...in one of the solutions the rate of conversion of plant and depreciation in trial balance has been taken to be 41 i.e the closing rate....and in the other solution...its given as rs 38 i.e the rate when it was actually purchased.....

sum1 please explain to me....as to which is the correct treatment and why.....

Replies (2)

CA Tushar Lakhanpal

378 Points Posted on 16 February 2010

plant amounting to $120000(excluding depreciation) at the end of the year

rate of depreciation is 10% p.a

Rate of 38 per $

cannot be used as this is historic cost ...

Rate of 41 shud be used as it will give the nearest value////

well i think wen i studied this topic i used the average value though

CA Harit Kapoor

Chartered Accountant

43 Points Posted on 16 February 2010

but in case of a normal cicumstance when depreciation is not incorporated in the trial balance....we value fixed assets on historical cost basis...so is it because that the depreciation is involved in this case....so therefore we are valuing it on current cost basis??.....if so...why???