Accounting Treatment of Exchange Gain/Loss on Export/Import of Goods in Financial Statements Under AS Framework
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- Last Updated on 20 March, 2025
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This document examines the accounting treatment of foreign exchange gains and losses arising from export and import transactions under the AS framework. The case involves a company engaged in both exporting goods and importing raw materials, with transactions recorded at the prevailing exchange rate at the time of sale or purchase. Due to exchange rate fluctuations, the actual amounts realized or paid differ from the initially recorded values. The issue discussed is whether exchange gains on export sales should be classified as part of revenue or separately recognized as other income, and whether exchange losses on import purchases should be included in the cost of goods or treated as other expenses. Additionally, it evaluates whether foreign exchange gains and losses can be offset for financial reporting or must be disclosed separately based on materiality considerations.
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