TMI BlogVI - Effects of changes in foreign exchange rates (w.e.f. AY 2017-18)X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 ('the Act') and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. This Income Computation and Disclosure Standard deals with: ( a ) treatment of transactions in foreign currencies; ( b ) translating the financial statements of foreign operations; ( c ) treatment of foreign currency transactions in the nature of forward exchange contracts. Definitions 2. (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivable are denominated in a foreign currency; or ( iii ) becomes a party to an unperformed forward exchange contract; or ( iv ) otherwise acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency. ( h ) Forward exchange contract means an agreement to exchange different currencies at a forward rate, and includes a foreign currency option contract or another financial instrument of a similar nature; ( i ) Forward rate is the specified exchange rate for exchange of tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proximates the actual rate at the date of the transaction may be used for all transaction in each foreign currency occurring during that period. If the exchange rate fluctuates significantly, the actual rate at the date of the transaction shall be used. Conversion at Last Date of Previous Year 4. At last day of each previous year:- ( a ) foreign currency monetary items shall be converted into reporting currency by applying the closing rate; ( b ) where the closing rate does not reflect with reasonable accuracy, the amount in reporting currency that is likely to be realised from or required to disburse, a foreign currency moneta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 43A of the Act or Rule 115 of Income-tax Rules, 1962, as the case may be. Financial Statements of Foreign Operations 7. The financial statements of a foreign operation shall be translated using the principles and procedures in paragraphs 3 to 6 as if the transactions of the foreign operation had been those of the person himself. Forward Exchange Contracts 8. (1) Any premium or discount arising at the inception of a forward exchange contract shall be amortised as expense or income over the life of the contract. Exchange differences on such a contract shall be recognised as income or as expense in the previous year in which the exchange rates change. Any profit or loss arising on cancellation or renewal sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, whichever is later. (5) Premium, discount or exchange difference on contracts that are intended for trading or speculation purposes, or that are entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction shall be recognised at the time of settlement. Transitional Provisions 9. (1) All foreign currency transactions undertaken on or after 1st day of April, 2016 shall be recognised in accordance with the provisions of this standard. (2) Exchange differences arising in respect of monetary items or non-monetary items, on the settlement thereof during the previous year commencing on the 1st day of April, 2016 or on conversion thereof at the last day of the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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