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

How does AS 11 deal with the tax effects of gains and losses on foreign currency transactions and exchange differences on translating foreign operations' statements?

AS 11 states that tax effects associated with foreign currency transaction gains and losses and with translation exchange differences of foreign operations are accounted for under AS 22, Accounting for Taxes on Income. AS 11 itself does not prescribe a separate tax treatment.

  1. AThey are accounted for in accordance with AS 22, Accounting for Taxes on IncomeCorrect
  2. BThey are ignored since exchange differences are not taxable
  3. CThey are accounted for under AS 12, Government Grants
  4. DThey are accounted for as per AS 11 itself using the closing rate

Explanation

Paragraph 35 says these gains, losses and exchange differences may have associated tax effects, which are accounted for in accordance with AS 22. AS 11 does not provide its own tax treatment.

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