Foregin Exchange Loss on Capital Investments

This query is : Resolved

Ravi Kumar.S (Querist)
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13 September 2007 There are Two Companies Say X and Y

X is reporting enterprise (India)
Y is foregin subsidary (China )

Quary: While making the investment in foreign subsidary at different dates there was difference in exchange rates which tantamounts to foreign exchage loss
Q1. will it be treated as foregin exchange loss and debited to P & L A/c
Or
Shown as Capital reserve with negitive figures (i.e., Loss)

Q2. Is it correct way of disclosure

SUBRAMANIA SARMA G

SUBRAMANIA SARMA G (Expert)
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14 September 2007 As per the Indian GAAP all the assets are to be shown at cost, which normally include the cost of purchase, expenses incurred in bringing the asset into present position etc. In the present case, Investment made by X in shares of Y should be recorded at the rate on which the transaction is entered into. Again when subsequent investments are made, the same would have been recorded at the rates on which the transactions is made. In other words the question of Foreign Exchage loss arising does not arise.