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CMA Intermediate · Financial Accounting · The Effects of Changes in Foreign Exchange Rates (AS 11)

Delhi Traders Ltd holds 80% of a non-integral foreign subsidiary and consolidates it. During the year the translation of the subsidiary's statements produced a total exchange difference of ₹5,00,000 (credit). Under AS 11, how is it reported in the consolidated balance sheet?

The 20% minority share of the difference, ₹1,00,000, is reported as part of minority interest, and the remaining ₹4,00,000 is accumulated in the foreign currency translation reserve. None of it is taken to profit and loss.

  1. A₹4,00,000 in foreign currency translation reserve and ₹1,00,000 as part of minority interestCorrect
  2. BThe entire ₹5,00,000 in foreign currency translation reserve
  3. C₹4,00,000 credited to profit and loss and ₹1,00,000 to minority interest
  4. DThe entire ₹5,00,000 as part of minority interest

Explanation

AS 11 states that when a non-integral foreign operation is consolidated but not wholly owned, accumulated exchange differences attributable to minority interests are allocated to and reported as part of the minority interest. The minority share is 20% of ₹5,00,000 = ₹1,00,000. The remaining 80%, ₹4,00,000, stays in the translation reserve and none goes to profit and loss.

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