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Q. > Please Help: APPLICABILTY OF AS 11
We have purchased a capital goods from USA.
for i.e
Advance Made as on 1st December 2010
Receipt of Goods on port 20th February 2011
Clearance of Goods fro port 25th February 2011.
Invoice Date 1st January 2011
Invoice accounted on 31st March 2011.
Query :-
Which rate of exchange should i consider for capitalization of assets.
i.e. as on 1st December 2010 or 20th February 2011 or 25th February 2011 or 1st January 2011 or 31st March 2011.
How to give the accounting treatment of whole transaction??
1 Answers
answered Feb 26, 2012 by Mrattunjay , New Delhi
PLEASE Refer section 43A for the relevant provision
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Comments
CA VIKAS JAIN
06-Jun-2011 , 10:53:20 am(1)IN case of import of assets the date on which risk and rewards associated with the asset transfer to the buyer from seller should be considered. so its depends upon whether its a FOB contract transaction or CIF contract transaction. As in absence of information we assumed the transaction date is 25th feb, the day when good got clearance from port in favour of buyer. Therefor the exchange rate prevailing on 25th feb should be considered for capitalization of assets in books. (2)At the reporting date the liability in foreign currency be reported at closing rate and the difference will be recoganised in income statement.
Krunal
07-Jun-2011 , 02:22:16 amThanks Vikas for your valuable comments.
CA. Sachin Data
08-Jun-2011 , 04:00:39 amPlease brief out the question. What is the date when full and final payment has been made against the purchase.... In any case, the foreign exchange fluctuation has to be given effect on the reporting date.
Sourabh Gupta
22-Jun-2011 , 01:41:29 amMr. Vikas is correct, but for the purpose of Income Tax, exchange difference arising on payment will be added to the cost/wdv of the assets as per section 43A.