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

Which of the following is NOT, by itself, a foreign currency transaction as described in AS 11, for an Indian enterprise whose reporting currency is the rupee?

A sale to a Singapore buyer priced and payable in rupees is not a foreign currency transaction. AS 11 looks at the currency of denomination or settlement, not the location of the counterparty. Rupees are the reporting currency, so no foreign currency is involved.

  1. ASelling goods to a buyer in Dubai at a price denominated in US dollars
  2. BBorrowing funds where the amount repayable is denominated in euros
  3. CSelling goods to a buyer in Singapore at a price fixed and payable in rupeesCorrect
  4. DBecoming a party to an unperformed forward exchange contract

Explanation

A foreign currency transaction is one denominated in or requiring settlement in a foreign currency. A sale priced and settled in rupees is in the reporting currency, so it is not one, even though the buyer is overseas. The other three are listed in the standard: sale priced in foreign currency, borrowing denominated in foreign currency, and an unperformed forward contract.

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