Foreign Exchange Rate

This query is : Resolved

Rajesh (Querist)
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07 July 2010 Respected Sir/Mam

Plz solve it...

We purchased a Mech. Rs 100000 from froeign country in Perivous Year. but We paid Rs.116000. Rs. 16000 in cuurent year due to Forign Exxchange.

What is Treatment of That Rs. 16000

1 Capitalised Or Not
2 If Capitalised then which year???

CA SMR

CA SMR (Expert)
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07 July 2010 1. To be capitalised

2.The asset should have been revalued as per the closing exchange rate as on 31st March,or whichever is the last day of the financial year.

In this case the amount of Rs 16000/- is to be added to the asset value at the time of payment.

The following is taken from AS11
Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets, which are carried in terms of historical cost, should be adjusted in the carrying amount of the respective fixed assets. The carrying amount of such fixed assets should, to the extent not already so adjusted or otherwise accounted for, also be adjusted to account for any increase or decrease in the liability of the enterprise, as expressed in the reporting currency by applying the closing rate, for making payment towards the whole or a part of the cost of the assets or for repayment of the whole or a part of the monies borrowed by the enterprise from any person, directly or indirectly, in foreign currency specifically for the purpose of acquiring those assets.