OR ABC Ltd, borrowed 10,000 US $ in foreign currency on 1st April, 2025 at 6% p.a. annual interest and acquired a depreciable asset. The exchange…

(i) Option under Para 46A is availed (Journal Entries in the Books of ABC Ltd. Date Particulars ₹ (Dr.) ₹ (Cr.) 2025 Apr. 01 Bank Account (10,000 x 85) Dr. 8,50,000 To Foreign Loan Account 8,50,000 2026 Mar 31 Finance Cost (USD 10,000 x 6% x 90) 54,000 To Bank Account 54,000 Mar 31 Foreign Exchange Difference Account Dr. 50,000 To Foreign Loan Account [10,000 x (90-85)] 50,000 Mar 31 Property, Plant and Equipment Dr. 50,000 To Foreign Exchange Difference Account 50,000 In this case, since the option under Para 46A is availed, the Exchange Loss of 50,000 is capitalized in the cost of Property, Plant and Equipment, which will indirectly get recognized in the Profit & Loss A/c by way of increased depreciation over the remaining useful life of the asset. (ii) The difference in treatment of exchange difference if Para 46 A of AS 11 is not availed. In this case, since the option under Para 46A is NOT availed, the Exchange Loss of 50,000 is recognised as an expense in the Statement of Profit and Loss for the year ending 31 March 2026. (iii) The difference regarding treatment of exchange difference if the loan was taken to finance the operations of the entity, not to procure a depreciable asset and option under Para 46 A of AS 11 is availed by the company In this case, since the option under Para 46A is availed, the Exchange Loss of 50,000 is accumulated in the FCMITD A/c, which will be subsequently spread over and debited to P&L A/c over the tenure of the loan.