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Export Proceeds - Accounting Treatment
Saturday, January 10, 2009

Initial Recognition: A foreign currency translation shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
Recognition of Exchange Difference: Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in the Profit and Loss in the period in which they arise.
(Ref: Para 21 and 28 of International Accounting Standard IAS-21)
In the context of above mentioned paragraphs initially export sales would be booked at the spot rate and susequently effect of any change in exchange rate would be charged to Profit and Loss Account.
Accounting Entries:
Initial Recognition:
(Dr) Export Sales Receivables----------1,000
(Cr) Export Sales ----------------------1,000
Subsequently
(Dr) Bank Account---------------------980
(Dr) Exchange Rate Loss----------------20
(Cr) Export Sales Receivalbes----------1,000

Labels: accounting