By Himanshu V. Kishnadwala, Chartered Accountant
New Page 1Section A : Treatment of
Foreign Exchange Fluctuations as per AS-11 — ‘The Effects of Changes in Foreign
Exchange Rates’ issued under the Companies (Accounting Standards) Rules, 2006
Reliance Industries Ltd. — (31-3-2008)
From Notes to Accounts :
The Company has continued to adjust the foreign currency
exchange differences on amounts borrowed for acquisition of fixed assets to the
carrying cost of fixed assets in compliance with Schedule VI to the Companies
Act, 1956 as per legal advice received, which is at variance to the treatment
prescribed in Accounting Standard (AS-11) on ‘Effects of Changes in Foreign
Exchange Rates’ notified in the Companies (Accounting Standards) Rules 2006. Had
the treatment as per AS-11 been followed, the net profit after tax for the year
would have been higher by Rs.29.65 crore.
From Auditors’ Report :
In our opinion and read with Note No. 5 of Schedule ‘O’
regarding accounting for foreign currency exchange differences on amounts
borrowed for acquisition of fixed assets, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement dealt with by this report are in compliance with
the Accounting Standards referred to in Ss.(3C) of S. 211 of the Companies Act,
1956.
From Accounting Policies on Foreign Currency Translation :
Exchange differences :
Exchange differences arising on the settlement of monetary
items or on reporting company’s monetary items at rates different from those at
which they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the year in
which they arise, except those arising from investments in non-integral
operations. Exchange differences arising in respect of fixed assets acquired
from outside India on or before accounting period commencing after December 7,
2006 are capitalised as a part of fixed asset.
- Chemplast Sanmar Ltd. — (31-3-2008)
From Notes to Accounts :
Consequent to the Notification of Companies (Accounting
Standards) Rules, 2006, the exchange differences relating to import of fixed
assets, which were hitherto being capitalised as part of the cost of fixed
assets, have been recognised in Profit and Loss Account. As a result of this
change, the profit for the year ended 31st March 2008 has decreased by Rs. 76.07
lacs.
- Tata Elxsi Ltd. — (31-3-2008)
From Notes to Accounts :
Adoption of Revised Accounting Standard :
Treatment of Foreign Fluctuation :
The Company has adopted the Accounting Standard 11 ‘The
Effects of Changes in Foreign Exchange Rates’ (AS-11) issued under the Companies
(Accounting Standards) Rules, 2006, consequent to which exchange differences
arising on restatement/payment of foreign currency liabilities contracted for
purchase of fixed assets are charged to the Profit and Loss account.
Prior to the adoption of AS-11, the Company adjusted the
exchange differences arising on restatement/payment of such liabilities against
the cost of the related asset. Consequent to the change in accounting policy,
the profit before tax for the year and exchange gain is higher by Rs.1.90 lakhs.
- Ramkrishna Forgings Ltd. — (31-3-2008)
From Notes to results submitted to BSE :
As per the legal advice received by the Company with regard
to treatment for the foreign currency exchange difference on amount borrowed for
acquisition of fixed assets from country outside India, the foreign currency
exchange difference has been adjusted to carrying cost of fixed assets in
compliance with Schedule VI of the Companies Act, 1956 which is at variance with
the treatment prescribed in Accounting Standard (AS-11) on ‘Effects of Change in
Foreign Currency Rates’ as notified in the Companies (Accounting Standard)
Rules, 2006. Had the treatment as per AS-11 been followed, the net profit after
tax, net block as well as reserves and surplus would be lower by Rs.2,33,92,121.
