Imports of capital goods

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vijeesh V R

CA Final

59 Points Posted on 29 March 2012

We have Purchased asset on Credit, and on 31st march we have accounted creditor on closing rate.

Whether the change in Foreign rate has to be Capitalise or we can Charge it in P&L

Please clarify.

Replies (2)

Giridhar S Karandikar

Team Lead

5675 Points Posted on 29 March 2012

As per AS-11 it should be capitalized to the asset A/c. Also please refer teh below link for your query.

https://www.mca.gov.in/Ministry/notification/pdf/Insertion_Para_46A_GSR_914E_2011.pdf

I dont agree with Mr Giridhar. As this notification has clearified that only long term foreign currency monetary items 's exchange difference can be capitalised to fixed assets, the creditor should be checked whether it is long term or short term.Had it been a foreign currency loan in respect of buying long term capital assets, it would had been capitalised.

Further this option of capitalisation cannot availed in this year in case of new asset is purchase in this year.As para 46A clarifies that this will be applicable in respect to those who have availed the option as per para.( This applies to rate difference in redemption of loans of substequent valuation of foreign loans which was borrowed in previous years for purchase of long term capital assets.)