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Presentation of Foreign Currency Monetary Item Translation Difference Account.
March, 31st 2013

     Presentation of Foreign Currency Monetary Item Translation Difference

1.      In the year 2009, the Ministry of Corporate Affairs amended Accounting Standard (AS)
         11, The Effects of Changes in Foreign Exchange Rates by inserting Paragraph 46. As
         per Paragraph 46, in respect of accounting periods commencing on or after 7th
         December, 2006 and ending on or before 31st March, 2011, at the option of the
         enterprise, exchange differences arising on reporting of long-term foreign currency
         monetary items at rates different from those at which they were initially recorded
         during the period, or reported in previous financial statements, insofar as they relate to
         the acquisition of a depreciable capital asset, can be added to or deducted from the cost
         of the asset and shall be depreciated over the balance life of the asset, and in other
         cases, can be accumulated in a " Foreign Currency Monetary Item Translation
         Difference Account" in the enterprise's financial statements and amortised over the
         balance period of such long-term asset/liability but not beyond 31st March, 2011, by
         recognition as income or expense in each such periods.

2.      On 29th December, 2011, the MCA, through the Companies (Accounting Standards)
        Amendment Rules, 2011, further extended the date of amortisation of the balance in
        the FCMITDA to 31st March, 2020 instead of 31st March, 2011. The MCA on
        December 29, 2011, inserted paragraph 46A in the AS 11, The Effects of Changes in
        Foreign Exchange Rates through Companies (Accounting Standards) (Second
        Amendment) Rules, 2011, on similar lines as paragraph 46.

3.      As in the Revised Schedule VI format, no line item has been specified for the
        presentation of "Foreign Currency Monetary Item Translation Difference Account
        (FCMITDA)", the Council of the Institute at its 324th meeting held on March 24-26,
        2013 at New Delhi, considered the issue regarding the presentation of the FCMITDA
        in the balance sheet.

4.       The Council noted that the Framework on Preparation and Presentation of Financial
        Statements issued by ICAI, defines an asset as follows:

          "An asset is a resource controlled by the enterprise as a result of past events from
          which future economic benefits are expected to flow to the enterprise."

        Where the balance in FCMITDA represents foreign currency translation loss, it does
        not meet the above definition of `asset' as it is neither a resource nor any future
        economic benefit would flow to the entity therefrom. Accordingly, such balance cannot
        be reflected as an asset.

   Accordingly, the Council decided that debit or credit balance in FCMITDA should
   be shown on the "Equity and Liabilities" side of the balance sheet under the head
   `Reserves and Surplus' as a separate line item.

5. The aforesaid decision of the Council supersedes the following Frequently Asked
   Question on AS 11 notification ­ Companies (Accounting Standards) Amendment
   Rules, 2009 (G.S.R. 225 (E) dt. 31.3.09) issued by Ministry of Corporate Affairs on
   May 18, 2009, which was issued by the Accounting Standards Board of ICAI on May
   18, 2009:

   "(14) How `Foreign Currency Monetary Item Translation Difference Account' should
        be presented in the Balance Sheet?


   The `Foreign Currency Monetary Item Translation Difference Account' should be
   shown as a separate line item in the Balance Sheet, in line with treatment given to
   Deferred Tax Asset/Liability, i.e. after the head `Investments' or after the head."
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