Explaining AS11 (accounting for foreign exchange losses / profits)

Companies Act has modified AS11 by inserting paragraph 46 in AS!!, which allows companies to postpone on capital account till 2011. This will help a number of companies write back large sums of losses which they had earlier written off. These foreign exchange losses also known as MTM (Mark to Market), still have to be provided for all liabilities which are falling within next 12 months under a Forex Fluctuation Reserve Account. However when the liability is falling after next 12 month period, the loss can be capitalised to the relevant asset. However losses on account of revenue transactions would still need to be written off in the year when these have been incurred.

The above amendment is likely to help many companies, which have suffered massive losses on account of foreign exchange losses due to recent volatility in forex rates.