Companies (Accounting Standards) (Second Amendment) Rules, 2011 – Amendment in sub-heading ‘Accounting Standard (AS) 11’ relating to The Effects of Changes in Foreign Exchange Rates

New Delhi, dated 29 December, 2011

GSR :- In exercise of the Powers conferred by clause (a) of sub-section (1) of section 642 read with sub-section (1) of section 210A and sub-section (3C) of section 211 of the Companies Act, 1956 ( 1 of 1956), the Central Government in consultation with the National Advisory Committee on Accounting Standards, hereby makes the following amendments in the Companies (Accounting Standards) Rules, 2006, namely :-

1. (1) These rules may be called the Companies (Accounting Standards) (Second Amendment) Rules, 2011,

(2) They shall come into force on the date of their publication the Official Gazette.

2. In the Companies (Accounting Standards) Rules, 2006, (hereinafter referred to as the said rules), in the Annexure, Under the heading “B. ACCOUNTING STANDARDS”, in the sub-heading “Accounting Standard (AS) 11″ relating to The Effects of Changes in Foreign Exchange Rates”, after paragraph 46, the following paragraph shall be inserted, namely,-

” 46A. (1) In respect of accounting periods commencing on or after the 1st April, 2011, for an enterprise which had earlier exercised the option under paragraph 46 and at the option of any other enterprise (such option to be irrevocable and to be applied to all such foreign currency monetary items), the 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 , in so far 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 amortized over the balance period of such long term asset or liability, by recognition as income or expense in each of such periods, with the exception of exchange differences dealt with in accordance with the provisions of paragraph 15 of the said rules.

(2) To exercise the option referred to in sub-paragraph (1), an asset or liability shall be designated as a long term foreign currency monetary item, if the asset or liability is expressed in a foreign currency and has a term of twelve months or more at the date of origination of the asset or the liability:

Provided that the option exercised by the enterprise shall disclose the fact of such option and of the amount remaining to be amortized in the financial statements of the period in which such option is exercised and in every subsequent period so long as any exchange difference remains unamortized.”



Joint Secretary to the Government of India

Foot Note: The Principal regulations were published in the Gazette of India, Extraordinary,Part II, Section 3, sub-section (i) vide GSR 739(E), dated the  7th December, 2006 and amended vide notification number G.5.12,212(E), dated the 27th March, 2008 and subsequently amended by GS12 No. 225(E), dated the 31′ March, 2009 and GSR No. 378(E), dated the 11th May, 2011.

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