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

Gomti Ltd. exported goods on 1 February for USD 30,000 when the rate was Rs 82. The debtor remained unpaid at 31 March, when the closing rate was Rs 84. The amount was received on 15 April at Rs 83. What exchange difference is recognised in the profit and loss of the next year, ending 31 March of the following year?

A loss of Rs 30,000 is recognised in the next year. The debtor was restated at the closing rate of Rs 84 at year end, and it was then settled at Rs 83. The Rs 1 fall on USD 30,000 is an exchange loss in the period of settlement.

AGain of Rs 30,000
BLoss of Rs 30,000Correct
CGain of Rs 60,000
DLoss of Rs 60,000

Explanation

At 31 March the debtor was restated at 84, giving a gain of 30,000 x 2 = Rs 60,000 in the first year. On receipt at 83 the carrying amount of 30,000 x 84 falls by 30,000 x 1 = Rs 30,000, which is a loss in the next year. Rs 30,000 gain is the net effect over both years, not the next year's charge. Rs 60,000 gain is the first year's amount.

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