Foreign branch accounting

Accounting Entries 1467 views 4 replies

Kindly see Question No. 6 of Advanced Accounting MAy 2012....
 

https://220.227.161.86/27518suggans_ipcc_may12-5.pdf

My query is, why Assets & Depreciation were taken at Rs.50 and not Rs.43 when the Assets were acquired. Kindly explain in detail.

Thanks in Advance.

 

Replies (4)

I think you might be referring question 6 of the attachement. So answer is since the branch is non integral foreign operation all items of balance sheet will be get converted at closing rate. hope this clarifies.

Even in Integral Foreign Operations, all the items of Balance Sheets are taken at closing rate apart from Fixed Assets which are taken at the rates preavailing at the time of acquisition.

Still not sure and clear.... can someone explain further.

No its not like that. .... only monetary assets and liability are converted at closing rates for integral foreign operation. However in your given question it is clearly stated that its non integral foreign branch therefore you have to use closing rate for all balance sheet items.

Non integral operation :- for assets, liabilities, monetary assets & liabilities apply close rate for converstion.

Integral operation being an extended arm of reporting enterprise :- for fixed assets & depreciation use rate which is prevailing on date of purchase. translate it using same principles as if foreign operation had been those of reporting enterprise.


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