ACCOUNTING STANDARDS

ACCOUNTING STANDARD 11

“THE EFFECT OF CHANGES IN FOREIGN

EXCHANGE”

Issued by the Institute of Chartered

Accountanats of India

Commencing from 1-04-2004

APPLICABILITY To the firms who are

In Accounting Transaction in Foreign Exchange Transleting Financial Statements in Foreign

Exchange In Deal with Accounting of Foreign Currency

Transaction in the Nature of Foreign Exchange Contract

OBJECTIVE The Main Objective is

To Prescribe how to include Foreign Currency Transactions in Financial Statement

To Prescribe how to include Foreign Operation Transactions in Financial Statement

DEFINITIONS Average Rate

The Mean of Exchange Rates in Force during the Year Closing Rate

The Rate of Exchange on the Date of Balance Sheet Exchange Difference

The Difference Resulting from Reporting the Same Number of Unit of Forgein Currency in the Reporting Currency at Different Exchange Rate

Exchange Rate The Ratio for Exchange of two Currencies

Foreign Currency The Currency Other than Reporting Currency

Foreign Operations The Business Activity Conducted in Country other

than Country of Reporting Enterprise Forward Exchange Contract

An Agreement to Exchange Different Currency at Forward Rate

Forward Rate The Spwcified Exchange Rate for Exchanges of

Two Currencies at Specified Future Date

Monetory Items Assests and Liability which are Determinable in

Amount of Money Net Investment

The Reporting Enterprises Net Share of That Operation

Non-Monetory Items The Assest and Liabilities Other than Monetory

Items Reporting Currency

The Currency used in Presenting the Financial Statement

INITIAL RECOGNITION A Transaction which is Denominated in

Foreign Currency Including Following Transaction

Buying and Selling of Goods and Services in Foreign Corrency

Borrowing and Lending Fund in Foreign Currency Acquiring or Desposing of Assets Incuring or settling Liabilities

REPORTING AND REPORTING RATES Fixed Assets – Rate Preveiling on the date of

Acqusition Current Assets – Closing Rate Current Liabilities – Closing Rate Equity and Borrowing – Historical Rate

Prevalent at the Date of Recording

RECOGNITION OF EXCHANGE DIFFERENCE Exchange Differences arising on

Settlement of Monetary items Difference in Rates

From Those at which they were Initially Recorded During the Period and

At Which they are Consolidated in Enterprise Financial Statement

The Difference is to be Transferred to Profit and Loss Accounts

DISCLOSURE IN FINANCIAL STATEMENT The Amount of Exchange Differences included in

the Profit and Loss Account; and Net Exchange Differences Accumulated in

Foreign Currency Translation Reserve as a Separate Component of Shareholders’ Funds, and

Reconciliation of the Amount of such Exchange Differences at the Beginning and End of the Period

FORWARD EXCHANGE CONTRACT The Contract Entered to Establish the

Amount of the Reporting Currency required at Settlement Date of Transaction

This Contract is Entered to Minimize the Risk of Changes in Foreign Exchange Rate

The Primium or Discount Arising Should be Amortised as Expense or Income over The Life of The Contract

ACCOUNTING STANDARD 16 Accounting Treatment of “BORROWING

COST” Issued by The institute of Chartered

Accountant Of India Commencing From 1-04-2000

DEFINITIONS Borrowing Cost

The Interest and Other cost Which is Incurred by an Enterprise in Relation to Borrowing of Funds

Qualifying Asset Assets that Takes Substaintial Time Period to

Keep Ready to Use or Sale

Specific Borrowing If any Enterprise Bowwored Money for Specefic

Purpose or for Qualifying assets then it is said to be Specific Borrowing

In other case, It will be General Borrowing

APLLICABILITY

Borrowing

Qualifying

Asset

AS 16 Applicable

If there is General Borrowing then the Interest will be DirctlyCharged to Profit and Loss Account

RECOGNITION As per AS – 16, amount of borrowing cost

should be recorded or recognized in the financial statement as follows If any Borrowing Cost is incurred for Qualifying

Assets then It should be Capitalized If any Borrowing Cost is Not having any

Connection with Q.A. then It should be transfer to Profit and Loss Account

THANK YOU

Presented By:-Tushar Rathi