A company(having export credit gurantee) sold goods (Amount in $) to a foreign customer . The customer made default and the company received amount towards the debt in INR against this Export Credit Guarantee.
Can any one please tell what is the accounting treatment and disclosure requirement for amount received against Export Credit Guarantee? Thanks in Advance
You write off 100% of the customer invoice balance as not recoverable provided it is as per FEMA / RBI norms (say amount is not more than 5% of the total export turnover and is due for more than 180 days etc). The fact that the insurance claim is settled by ECGC will substantiate that it is a debt no longer recoverable.
You need to inform the AD (the bank thriough whom you are sending the docs) that you are writing off the debt along with supporting document and that the same amount is no longer recoverable.
The amount received from ECGC , you record as Insurance claim received as Income in INR (it will be a local receipt and not a foreign receipt)
In presentation you need to disclose foreign debt as bad debt seperately.
regards
CAclubindia
