[Illustrative Checklist] Disclosure requirements under AS 11 | The Effects of Changes in Foreign Exchange Rates

The objective of AS 11, The Effects of Changes in Foreign Exchange Rates, is to decide which exchange rate to use in accounting for foreign currency transactions and foreign operations and how to recognise in the financial statements the financial effect of changes in exchange rates. An enterprise may carry on activities involving foreign exchange in two ways. It may have transactions in foreign currencies or it may have foreign operations. In order to include foreign currency transactions and foreign operations in the financial statements of an enterprise, transactions must be expressed in the enterprise’s reporting currency and the financial statements of foreign operations must be translated into the enterprise’s reporting currency. This Standard also deals with accounting for foreign currency transactions in the nature of forward exchange contracts.

As per the stipulation of this standard, an entity must comply with the below-mentioned disclosure requirements:

I. The entity shall disclose the following:

(i) The number of exchange differences included in the net profit or loss for the period in accordance with AS 11

(ii) The net exchange differences accumulated in foreign currency translation reserve as a separate component of shareholders’ funds in accordance with AS 11

(iii) Reconciliation of the amount of exchange differences mentioned at (ii) above at the beginning of the period and end of the period

II. If reporting currency is different from the currency of the country in which the enterprise is domiciled, whether following has been disclosed:

(i) The reason for using a different currency

(ii) The reason for any change in the reporting currency

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