Loss on oreign Exchange Fluctuation

As per AS 11( revised), all exchange differences arising w.r.t. monetary items are to be adjusted in income statement subject, of course, to the option now provided for in the recent amendment to accounting standards w.r.t this. There is no reason why the advances against supplies be treated as non-monetary item. Advances are claims adjustable against bills in definite monetary amounts. Accordingly adjustement as per AS 11 for monetary items may have to be followed in the point you raised.
 

As per AS 11( revised), all exchange differences arising w.r.t. monetary items are to be adjusted in income statement subject, of course, to the option now provided for in the recent amendment to accounting standards w.r.t this. There is no reason why the advances against supplies be treated as non-monetary item. Advances are claims adjustable against bills in definite monetary amounts. Accordingly adjustement as per AS 11 for monetary items may have to be followed in the point you raised.

Sundharabahu is right

Normally the following procedure is being adopted by most of the companies. If Forex cover has been made they will open an a/c called exchange lose/gain. Hence, the gain or loss both willbe accounted in the same account depending upon the receipt or payment & its currency value on the date of transaction despite the fluctuation.

Hi,

Can anybody tell me if Advances received towards export of goods, however at the option of importer that suply of godds delayed or cancelled and importer also confirmed that his claim is restricted to INR received by exporter. What should be treatment as per AS 11 or whether AS 11 is applicable or not?

If the importer confirms that the claims will be restricted to INR received by the importer, then in such case there is no foreign liabilities and the same will be provided in books in INR and accordingly there will be no foreign exchange gain/loss.