Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Exchange fluctuation recognition

CA Sumit Bansal (CA) (75 Points)

09 April 2012

Whether retention money of foreign supplier of capital assets are to be reinstated???

Pls reply with documentry evidence in support of ur answer.

Reply
Follow
Share

3 Replies

CA Sachin Rastogi (Audit/IFRS Manager) (338 Points)
Replied 09 April 2012

Yes, retention money of foreign supplier is a kind of liability which will be settled in cash in future. Thus, it is a monetary liability which requires restatement at each reporting date with the difference being recognised in income statement.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Sumit Bansal (CA) (75 Points)
Replied 09 April 2012

whether the exchange difference need to be adjusted from cost of capital assets or it will be routed through P/L a/c ?????

CA Sachin Rastogi (Audit/IFRS Manager) (338 Points)
Replied 09 April 2012

It is mentioned in my reply that such exchange differences must be booked in income statement. Adjustment to cost of capital asset is not preferred as it is not of a capital nature expense.

Exchange differences in this case mainly arises from the settlement of liability due to supplier and has nothing to do with the producing capacity of the capital asset.