This Accounting Standard should be read in the context of its objective and the General Instructions contained in part A of the Annexure to the Notification.) Objective A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the financial statements until the related revenues are recognised.
This Standard deals with the determination of such value, including the ascertainment of cost of inventories and any write-down thereof to net realisable value. This Standard should be applied in accounting for inventories other than: (a) work in progress arising under construction contracts, including directly related service contracts (see Accounting Standard (AS) 7, Construction Contracts); (b) work in progress arising in the ordinary course of business of service providers; (c) shares, debentures and other financial instruments held as stock-in-trade; and (d) producers’ inventories of livestock, agricultural and forest products, and mineral oils, ores and gases to the extent that they are measured at net realisable value in accordance with well established practices in those industries. The inventories referred to in paragraph 1 (d) are measured at net realisable value at certain stages of production.
In today’s global environment, many companies have operations that require maintaining their books of record in multiple currencies.
Surprisingly enough, determining the appropriate currency to use for each entity is not always as easy as simply using the entity’s local currency.
(ii) In the Companies( Accounting Standards) Rules, 2006 (hereinafter referred to as the principal rules), in rule 2,- (i) for clauses (a) and (b), the following clauses shall be substituted, namely:- ‘(a) “Accounting Standards” means the standards of accounting or any addendum thereto as specified in rule 3 of these rules; (b) “Act” means the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013), as the case may be;’; (ii) for clauses (d) and (e), the following clauses shall be substituted, namely:- ‘(d) “Financial Statements” means financial statements as defined in sub-section (40) of section 2 of the Companies Act, 2013; (e) “Enterprise” means a ‘company’ as defined in sub-section (20) of section 2 of the Companies Act, 2013 or as defined in section 3 of the Companies Act, 196, as the case may be;’. In the principal rules, in rule 4, in sub-rule (2), the words “General Purpose” shall be omitted. In the principals rules, in the ANNEXURE, under the heading “ACCOUNTING STANDARDS”, under the subheading “A.
General Instructions”, after paragraph 4, the following paragraph shall be inserted namely:- 5.
In a group situation, it is not uncommon for a foreign subsidiary to be a member of a group and paragraph 30.5 outlines various additional factors that are to be considered in determining the functional currency of a foreign operation which will then lead to the conclusion as to whether the functional currency is the same as that of the parent: A company may enter into a foreign exchange transaction with an overseas supplier whereby the transaction will be denominated in a foreign currency and will be settled in a foreign currency.
Therefore, the following are the most important factors an entity considers in determining its functional currency: In addition, the currency in which funds from financing activities are generated will also have a bearing on an entity’s functional currency as well as the currency in which receipts from operating activities (the day-to-day, revenue-producing activities of the entity) are usually retained.There are at least four major activities you would need to perform—depends on certain situations around the subsidiary entity: (1) translating into the presentation currency; (2) translating into the functional currency; (3) translating the foreign currency transactions; and (4) disclose certain situation in the financial footnote.Consider doing the task for three or five foreign operations. Before discussing the procedure, you would need to understand the concept of function currency, first.This occurs, for example, when agricultural crops have been harvested or mineral oils, ores and gases have been extracted and sale is assured under a forward contract or a government guarantee, or when a homogenous market exists and there is a negligible risk of failure to sell.These inventories are excluded from the scope of this Standard. The following terms are used in this Standard with the meanings specified: 3.1 are assets: (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.But, if the presentation currency differs from the entity’s functional currency, the company should translate its results and financial position into the presentation currency.