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

Sagar Pharma Ltd. has a foreign branch that is integral to its operations. At 31 March 2026 the branch held fixed assets bought for USD 40,000 on 1 April 2024 at ₹80.00 per USD, a closing rate of ₹84.00, and the average rate for the year was ₹82.00. As per AS 11 for translation of the branch's financial statements (integral foreign operation), at what rupee amount are the fixed assets reported before depreciation?

The fixed assets are reported at ₹32,00,000. For an integral foreign operation, non-monetary items carried at historical cost are translated at the exchange rate on the acquisition date, so USD 40,000 × ₹80 applies rather than the closing or average rate.

  1. A₹32,00,000Correct
  2. B₹33,60,000
  3. C₹32,80,000
  4. D₹33,00,000

Explanation

For an integral foreign operation, non-monetary items such as fixed assets carried at historical cost are translated at the rate on the date of acquisition. So USD 40,000 × ₹80.00 = ₹32,00,000. Closing rate (₹33,60,000) applies to monetary items and to non-integral operations, so it is wrong here.

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