03-27-2009, 08:20 PM
Star,
This is a very critical question since our industry has a practice to use booked foreign currency exchange rates where these have been contracted. Varied practice is also seen in the case where L/Cs receivables (invoices) have been negotiated with banks.
However, speaking strictly in accordance with IAS-21 this practice is incorrect.
The spot rate of transaction date has to be used on initial recognition. On eventual settlement the gain or loss will be taken to P/L account.
Regards,
KAMRAN.
This is a very critical question since our industry has a practice to use booked foreign currency exchange rates where these have been contracted. Varied practice is also seen in the case where L/Cs receivables (invoices) have been negotiated with banks.
However, speaking strictly in accordance with IAS-21 this practice is incorrect.
The spot rate of transaction date has to be used on initial recognition. On eventual settlement the gain or loss will be taken to P/L account.
Regards,
KAMRAN.
