Hello everyone
I have a question. Recently at work I came across this case.
A loan in USD currency say USD 100 was granted to a client in the year 2009 for a period of 5 years. the client paid interest on that loan upfront in 2009 in USD currency. The company converted the whole USD amount into INR @ 45 and parked the proceeds in the Prepaid Income(100$*45=4500 inr). The company has been accruing the income on yearly basis. the accrual of income is done by the company by taking 900INR each year to the P/L account. This effectively means that the company is accruing the income each year @ 45INR
My question - Should the company not be accruing the interest at prevailing rate/average rate as per AS 11.
the contention of the company is - Since the income received in 2009 was already converted into INR then, hence it does not qualify as a foreign currency transaction. And hence as per them, this does not fall under the purview of AS 11
I don't agree with this. Request the views of learned member. Also if some one can help with the relevant extract which can prove this point right. Many thanks
CAclubindia
