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As 11 para 46 and para 46a

Ghanshyam (Article) (52 Points)

01 November 2013

CA final Fin. Reporting

AS 11 para 46 and 46A

If any expert can explain this in clear language will be really appreciated...

Thank you

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CA and CMA Ravinder Singh (CA and CMA) (853 Points)
Replied 01 November 2013

as-11 says that any exchange difference (on long term as well as short term items) should be recognised in profit and loss account.

but para 46 was introduced on 31.03.2009 and was applicable with retrospective effect from financial year 01/04/2007. para 46 was added by NACAS allowing companies to capitalise the exchange difference on long term foreign currency loans.

para 46 had shelf life upto 31.03.2011. however, then it was further extended to 31.3.2012.

but on 31.03.2012 para 46a was added which allowed the companies to capitalise the exchage difference on long term foreign currency loans till 2020. this option can be exercised only once. in other words, once a company has decided either to recognise the difference in p and l or to capitalise it, then it cannot change till 2020.

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Kriti (Article Assitant) (106 Points)
Replied 31 January 2014

In the same para it says "in so far as they relate to the acquisition of a depreciable capital asset, can be added to or deducted from the cost of the asset and shall be depreciated over the balance life of
the asset, and in other cases, can be accumulated in a 'Foreign Currency Monetary Item Translation Difference Account' "

I am confused whether option is between treating it as revenue or capital or between adding it cost of asset or between accumulating the difference in Translation difference account??