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CA Intermediate · Advanced Accounting · AS 11 The Effects of Changes in Foreign Exchange Rates

Bharat Engineering Ltd imported a machine from a US supplier on 10 January 2026 for USD 20,000 when the rate was Rs 82 per USD. The invoice was unpaid on 31 March 2026, when the closing rate was Rs 84 per USD. Ignoring depreciation and other costs, at what amount should the machine be carried in the books on 31 March 2026 under AS 11?

The machine is carried at Rs 16,40,000. It is a non-monetary item measured at historical cost, so it stays at the rate on the transaction date (USD 20,000 x Rs 82). The closing rate affects only the payable, which is a monetary item.

  1. ARs 16,40,000Correct
  2. BRs 16,80,000
  3. CRs 16,00,000
  4. DRs 40,000

Explanation

The machine is a non-monetary item carried at historical cost. It is reported at the rate on the transaction date: USD 20,000 x Rs 82 = Rs 16,40,000. Using the closing rate of Rs 84 gives Rs 16,80,000, which is wrong because that rate applies to monetary items such as the unpaid payable, not to the machine.

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