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IND Accounting Standard..foreign trade

15 January 2022

Wrt export and import, please guide at what stage accounting entry is to be made wrt different supplies pet incoterms 2020 eg FOB, CFR, CIF,EXW.keeping in perspective accounting standard.

Please also cover warranty and corp/ bank guarantee in case of non performance of delivered supplies.

Thanks

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12 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 15 January 2022

Purchases a/c

Taxes and duties a/c

To payables a/c

When you place an over seas order. On the settlement data

Trade payable a/c

Fx loss

Fx gain

To Bank a/c

You will recognise fx loss and gain in cos

If you have purchased warranty, only then you must include it. Since warranty is always a performance obligation and included in the product cost, I don't think it is necessary.

Intangible assets standard does not prescribe any treatment for warranties or government guarantees. These are contracts with customers and the issuing company will account for it.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 15 January 2022

By fx loss

To fx gain

My mobile is getting stuck. I don't understand why

Jayanta Bandyopadhyay (230 Points)
Replied 15 January 2022

Sir

Thanks

Kindly mention AS and IAS and ICAI accounting guidelines, if any.

Rgds

1 Like

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 15 January 2022

AS 7

Ias 21

Warranties- IFRS 15

Ias 10 to capitalise any imoort duties and taxes. This means no need to pay current tax.

Then any kind of accounting for subsidiaries, the fx difference must be taken to equity.

Fx revaluations gains and losses as per IAS 10

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 15 January 2022

Ias 10= ias 16 I don't remember the numbers. I always remember by standard name.

Helper (Always be happy) (254 Points)
Replied 31 January 2022

Dear Yasaswi,

You mention that Warranty is performance obligation and not accounted (Accounted by issuing company only) so my question is if I am a seller for which there is warranty clause mention in Contract so as a seller , do i need to account for warranty provision.

Jayanta Bandyopadhyay (230 Points)
Replied 31 January 2022

Sir,

As an importer, we are getting 2 years free warranty. Nothing is free actually, it is definitely in -built, in total consolidated price. But as we want 5 years warranty, foreign vendor is separately raising an invoice.

As a buyer, how to account for this intangible assets,,depreciation,, when after 5 years there will be no warranty..so economic life is 3 years. Also customs duty assessment on this warranty?

Thanks in advance

Jayanta

Kolkata

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 31 January 2022

@ Helper

Yes! Provision for warranties is applicable as it meets the definition of provisions.

https://www.mca.gov.in/Ministry/pdf/INDAS37.pdf

Para 22 & 23

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 31 January 2022

@ Jayanth

The accounting treatment is done by the foreign seller.

you will recognise your product at cost and amortise.

pattern of consumption is used for choosing amortisation method.

Customs duty is added to the asset.

warranty can be any years and asset life can be amortised for three years only.

Warranty will not impact your financial statements.

Jayanta Bandyopadhyay (230 Points)
Replied 31 January 2022

Thanks, Sir.

Warranty will come thru a letter plus Invoice.

How to declare it to Customs?

Should we require CA certificate 15 CA, CB and pay duty?

Thanks

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 31 January 2022

Assurance type warranties are built in warranties

Service type warranties are usually paid by you for additional warranty can be treated as prepaid warranty and written off when the asset is written off