Difference between AS 11 and Ind AS 21?
Conceptually, is there any difference between AS 11 and Ind AS 21?
In AS 11, there is no concept of functional currency. Foreign currency is a currency other than the reporting currency. Also, there is no concept of presentation currency in AS 11. As per Ind AS 21, functional currency is the currency of the primary economic environment in which an entity operates. Foreign currency is a currency other than the functional currency. Presentation currency is the currency in which the financial statements are prepared.
AS 11 is applicable to exchange differences on all forward exchange contracts that are hedging instruments for existing assets and liabilities. Not applicable for those contracts that hedge firm commitments or highly probable forecast transactions.
Foreign currency derivatives not within the scope of AS 11 (some derivatives embedded in other contracts) are within the scope of Ind AS 21. Ind AS 21 is also applicable when an entity translates from functional currency to presentation currency.
Foreign exchange contracts: Trading or speculative in nature.
The premium or discount on the contract is ignored and at each balance sheet date the value of the contract is marked to market and the gain or loss on the contract is recognised. Accounted for as derivative and valued at fair value.
Foreign exchange contracts: Not for trading or speculative in nature.
The premium or discount on the contract is amortised as expense or income over the life of the contract. Exchange differences recognised in P&L in the reporting period in which the exchange rates change. Accounted for as derivative and valued at fair value.