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AS 11.            





In accounting for foreign currency transactions and foreign operations are to decide:

Which exchange rate to use and

How to recognize in the financial statements 


This Standard applies to:

(a) Accounting for transactions in foreign currencies; and

(b) Translating the financial statements of foreign operations.


Reporting currency:

It is the currency used in presenting the financial statements.


Foreign currency:

It is a currency other than the reporting currency of an enterprise.

Exchange rate:

It is the ratio for exchange of two currencies.

Average rate:

It is the mean of the exchange rates.



Forward rate:

It is the exchange rate established by the terms of an agreement for exchange of two currencies

Closing rate:  

It is the exchange rate at the balance sheet date.


Monetary items: 

It include foreign currency notes, balances in bank accounts denominated in a foreign currency, receivables, payables and loans denominated in a foreign currency.


Non-monetary items

These are assets and liabilities other than monetary items.


Fixed assets, inventories, investments in equity shares.


Settlement date:  

It is the date at which a receivable is due to be collected or a payable is due to be paid.


Recoverable amount:

It is the amount, to be recovered from the future use of an asset, including its residual value on disposal.


Initial recognition:

A transaction in a foreign currency should be recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. For practical reasons, a rate that approximates the actual rate is often used.

Changes in Exchange rate subsequent to initial recognition:


Monetary Item:

It should be reported using the closing rate but in the circumstances where the closing rate is unrealistic or where there are restrictions on remittances etc. the relevant monetary item should be reported at the realizable value.


Non-monetary item:

It should be valued at the lower of cost and fair value. Fair value is determined with reference to the closing rate. Exchange difference, if any, on the above should be treated as income/expense for the period.



Disclosure requirements:


Amount of exchange difference should be disclosed as follows:

a.  It should be included in the net profit or loss for the period.

b.  Adjust in the carrying amount of fixed assets during the 

     accounting period.

c.     Amount of difference in respect to the outstanding forward exchange contract relating to one or more subsequent accounting periods





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