we have a contract for development of a fixed assets, as per the contract:-
Total Contract amount =  260 Million AED
We have to pay this amount in Euro that is already fixed as per the contract it is 4.49 AED per Euro
whatever is the rate prevailing currently doesnt matter bcoz it has been already fixed in contract,
so my concern is exchange loss on payment will be added to the value of fixed Assets or
will have to transferred to P&L A/c

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Hi

 
Please give me your opinion on forex loss on Assets. Do you capitalize it or do expense it to the foreign loss

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Dear all,

Can you share me the international auditing standard document. Thanks

Danella,I double checked after the comment below, and I agree with Hemant. IAS 21.28 explicitly states that gains/losses on forex should be recognized in P&L. The forex is not attributable to the asset but to the financial liability.http://www.ifac.org/IAASB/
My apologies for my earlier answer.
Regards,
Jeroen

http://www.ifac.org/Store/Category.tmpl?Category=Auditing%2C%20Assurance%20%26%20Related%20Services

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Dear all

My Company has an outstanding USD loan of say US$10m and as our main subsidiaries are operating in China and earns revenue denominated in RMB, which will ultimately flow to our company in terms of RMB dividend (converted to USD due to exchange regulation in PRC).
As we need to make periodic payments say US$1m every quarter, we are considering entering forex contracts to fix the USD/RMB rate that matches the payments (i.e. 10 contracts @US$1m each @ either same conversion price or different conversion price).
How should we disclose …

Dear friends,

it happens that I am an employee of a manufacturing company who is making hedging for foreing currencies transactions.
Do you happen to have documentation on the bookings that I have to make in the balance sheet/profit&loss account?
With a specific example: spot exchange rate, forward exchange rate, what I should book as P&L gain/loss and in B/S as payables/receivables?
Thank you.
Adrian Mitranus

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Dear Gents,
I have an inquiry regarding the FroEx for construction contracts, if I won a contract in Euro and my functional currency is USD, shall I fix the exchange rate at the time of signing the contract and and every month will calculate revenue based on POC using this fixed rate or shall I change the contract amount very month (which is not practical) – pls. advise.
Thanks,

It is recommended that you fix the rate of exchange at the date of contract with concent of contractee and payment made accordingly but …

If the entity’s policy is to capitalise borrowing costs and obtains a foreign loan probably taking advantage of the lower interest rates, any exchange differences should be capitalised as will during the period of construction of the qualifying asset.
Regards,

Nyasha

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As per the amended IAS 23, all borrowing costs on qualifying assets should be capitalised (no option to expense).
Does exchange differences on foreign currency loans qualify as borrowing costs to be capitalised?
Best regards
Allan

Hi Allan

To my understanding any positive/negative FX difference is expensed directly to the P&L.

Regards,
Marc

The change to IAS23 will come into force on Jan 2009. So far that is only allowed alternative, the benchmark tre
atment is to expense.
The exchange differences on foreign currency should be included to assets under construction and therefore capitalised. After capitalisation of qualifying asset any exchange …