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CA Intermediate · Advanced Accounting · Accounting for Branches including Foreign Branches

Nandi Ltd. has a Dubai branch, a non-integral foreign operation, with the following in AED at year end: fixed assets 50,000 and net current assets 30,000, funded by head office account of 60,000 and profit retained 20,000. Closing rate is ₹22 per AED. Opening net investment in rupees was fixed assets at ₹21 and other items consistent. What is the rupee translation of net assets at year end under AS 11?

Net assets translate to ₹17,60,000. Under AS 11 a non-integral foreign operation's assets and liabilities, monetary and non-monetary, are translated at the closing rate. AED 80,000 of net assets at ₹22 per AED gives ₹17,60,000, with the difference going to foreign currency translation reserve.

  1. A₹17,60,000Correct
  2. B₹16,80,000
  3. C₹18,00,000
  4. D₹11,00,000

Explanation

For a non-integral foreign operation, all assets and liabilities are translated at the closing rate. Net assets = (50,000 + 30,000) = AED 80,000 × ₹22 = ₹17,60,000. Using the ₹21 opening rate gives ₹16,80,000, which is wrong because opening rates apply to no balance sheet item here.

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