Foreign exchange difference

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gorakh (Querist)
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13 April 2012 foreign exchange difference on account of acquisition of fixed assets needs to be capitalised or not? as as 11 doesnt permit it to do so ? but schedule vi does

CA Kishore Tallam

CA Kishore Tallam (Expert)
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14 April 2012 For the financial years commencing on or after 01-04-11, the foreign exchange fluctuations on foreign currency loans for purchased fixed assets cannot be capitalised since now ASs prevail over Rev Sch VI.

gorakh

gorakh (Querist)
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15 April 2012 i have paid advance to foreign company to purchase fixed asset agaisnt lc how to account for this transaction and consider which rate to determine the foreign exchange difference? should i take exchange rate on date of payment or receipt of machine to mumbai port as my purchase order is cif mumbai

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CA Kishore Tallam

CA Kishore Tallam (Expert)
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17 April 2012 The fixed asset should be recognised at the exchange rate when the significant risks and rewards are transferred to u. In respect of what rate to use, u may use the exchange rate which is regularly followed by ur company or RBI rate could be possible alternative rate.