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As 11

KARTIK JAIN (STUDENT) (150 Points)

01 May 2014

can anyone please explain practical treatment of para 46 & 46A of AS 11 plz respond with journal entries too.

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6 Replies

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 03 May 2014

Para 46 and 46A was has came out to mitigate the dificluties faced by the multi national companied in making foreign currency loan and their accounting. Bcs of foreign currency fluctuation it results in exchange loss which is play a vital role when it accounted through Profit and Loss account. Hence for removing the difficulties Optinal Scheme was bring out by the MCA...by this circular companies are able to deffer the currencey exchaneg loss in one or more periods so their profit and loss remian unaffected.... When exchange loss arise the companies earlier to this circular making following entries....

P& L A/c .............Dr.

To Foreign exchange Difference A/c

After the circular company have option either to show the same as above or may follow

as below

Foreign currency Monetary Item Translation Difference A/c------(Dr or Cr..as case may be)

To Foreign exchange loss A/c (Dr or Cr.)

Foreign currency Monetary Item Translation Difference(FCMITD) A/c shall be shown as Assets or Libility as case may be...and it shall be written off year to year on systematic basis...as directed by MCA.

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KARTIK JAIN (STUDENT) (150 Points)
Replied 03 May 2014

How is it related to AS16 too. Is it applicable only to companies or any firm or other entity can also follow the above practice.

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 03 May 2014

when a company borrow in foreign currency there arises exchange loss which is either to be capitalided or charged to profit nd loss account.....read recent amendments in this reagrds....icai has made announcemnt regarding applicability on other entities....m not sure....pleade read... there.