Effect of AS 11 on Investment in Foreign Subsidiary.

This query is : Resolved

Sheetal Metha (Querist)
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24 April 2008 As per para 15 of AS 11 Exchange difference arising on a net investment in a non-integral foreign operation (Foreign Subsidiary) should be accumulated in a Foreign Currency Translation Reserve in the Enterprise's financial statements until the disposal of the net investment, at which time they should be recognised as income or as expenses in accordance with para 31.

As per para 31 the exchange differences which have been so deferred/accumulated should be recogniosed as income or expenses at the time of disposal of a non-integral foreign operation.

Now query is as follows -
When such exchange differences are to be accumulated and not to be recognised as income or expense when the investment is in force what accounting treatment should be given.

One effect is to be given to Foreign Currency Translation Reserve as per para 15. Where the second effect can be given?

Whether the second effect can be give to the investments? If yes, can the value of investments be reduced if there is FE loss?

Please note that the financial statements of subsidiary are not consolidated with the enterprise's statements.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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28 April 2008 The second treatment will be in dimunition/appreciation in value of investments to be deducted from or added to the investments as the case may be.