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Forex fluctuation accounting

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Prashant

15 Points Posted on 10 May 2007

Dear All,
I have some confusion regarding accounting/tax effect for forex gain /loss on account of following :

1) The company has taken foreign currency loan for purchase of Fixed asset for which every quarter company pays loan instalment.
2) Exchange gain /loss on account of realisation proceed of debtors.

Thanks and Regards

Prashant Bhole

Replies (1)

Ankit Bhatia

163 Points Posted on 10 May 2007

As regards forex fluctuation (i.e on realisation difference)on debtors it will be treated as per AS 11 and credited /debited to profit.even expense /income on restatement of forex debtors will be routed through p/loss a/c.
above will be normal for Tax too and same A/c done as per AS11 will be valid for tax too,as Sec 145 doesnt prescribe any spl treatment for this case.
As regards forex fluctuation on both- Restatement and on realisation of money- connected to acqn of a capital asset ,-all the forex rate differences will be adjusted to the cost of the asset -as per Sch 6 -for accounting and as per Sec 43A -for tax effect.