TMI BlogICDS VI : Effects of Changes in Foreign Exchange RatesX X X X Extracts X X X X X X X X Extracts X X X X ..... encies translating the financial statements of foreign operations treatment of foreign currency transactions in the nature of forward exchange contracts. Note:- Foreign currency under this ICDS means currency other than the reporting currency. Reporting currency has been defined to be the Indian currency, except for foreign operations, where it would mean currency of the country where the operations are carried out. Considering this, generally, reporting currency would be the Indian currency and accordingly, foreign currency would generally mean currency other than the Indian currency. Forward exchange contract as defined under this ICDS means an agreement to exchange different currencies at a forward rate, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rate used for the year-end conversion as per ICDS and Ind AS may be different, the variance if any, needs to be considered while computing the income. (c) ICDS covers all non-monetary items whether carried at historical cost or fair value, except inventory carried at net realisable value (NRV). It prescribes conversion of these nonmonetary items at the exchange rate at the date of transaction. (d) non-monetary item being inventory which is carried at net realisable value denominated in a foreign currency shall be reported using the exchange rate that existed when such value was determined. 4. Recognition of Exchange Differences:- ( i ) In respect of monetary items, exchange differences arising on the settlement thereof o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be. As per the said section, if there exists an unpaid foreign currency liability towards the cost of an asset or for repayment of moneys borrowed for the purpose of acquiring such asset, then the exchange difference i.e. increase or decrease in the liability as expressed in Indian currency would entail a corresponding increase or decrease in the actual cost of the asset as defined in section 43(1) of the Act in the year of payment. 6. Financial Statements of Foreign Operations:- The financial statements of a foreign operation shall be translated using the principles and procedures in paragraphs 3 to 6 of this ICDS as if the transactions of the foreign operation had been those of the person himself. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange gain on forward contract of ₹ 0.90 is to be recognised as income and expense at the end of the said period. Notes:- This treatment of income or expense arising on account of premium, discount or exchange difference does not apply to contracts that are intended for trading or speculation purposes. These provisions also do not apply to a contract that is entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction. Firm commitment does not refer to assets and liabilities existing at the end of the previous year. Premium, discount or exchange difference on contracts that are intended for trading or speculation purposes, or that are entered into to hedge the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
