Page 2 - 15. COMPILER QB - INDAS 21

INDAS – 21 EFFECTS OF CHANGES IN

FOREIGN EXCHANGE RATES

(TOTAL NO. OF QUESTIONS – 13)

INDEX

S.No. Particulars Page No.

1 RTP Questions 15.1

2 MTP Questions 15.7

3 Past Exam Questions 15.10

RTPs QUESTIONS

Q1 (May 18)

On 30th January, 20X1, A Ltd. purchased machinery for $5,000 from USA supplier on credit basis. A’s Ltd.
functional currency is the Rupee. The exchange rate on the date of transaction is 1 $ = Rs 60. The fair value
of the machinery determined on 31st March, 20X1 is $ 5,500. The exchange rate on 31st March, 20X1 is 1$=
Rs 65. The payment to overseas supplier done on 31st March 20X2 and the exchange rate on 31st March

20X2 is 1$= Rs 67. The fair value of the machinery remains unchanged for the year ended on 31st March
20X2. Prepare the Journal entries for the year ended on 31st March 20X1 and year 20X2 according to Ind AS
21.

Solution
Journal Entries
Purchase of Machinery on credit basis on 30th January 20X1:
Rs. Rs.

Machinery A/c (5,000 x $ 60) Dr. 3,00,000
To Creditors 3,00,000
(Initial transaction will be recorded at exchange rate on the date of transaction)

Exchange difference arising on translating monetary item on 31st March 20X1:
Rs Rs
Machinery A/c [(5,500 x $ 65) – (5,000 x $ 60)] Dr. 57,500
To OCI a/c (Exchange Profit & Loss) 57,500
Profit & Loss A/c [(5,000 x $ 65) – (5,000 x $ 60)] Dr. 25,000
To Creditors 20,000

15.1