In what way is the accounting for a foreign currency borrowing more complicated than the accounting...

Question

In what way is the accounting for a foreign currency borrowing more complicated than the accounting for a foreign currency account payable?

Robert · Accepted Answer

Title: Accounting ways for the Differences between Foreign Currency Accounts Payable & 
Foreign Currency Borrowing 
Foreign currency accounts payable are restated at the end of the financial year, by taking the closing 
currency exchange rate as on 31st March and the difference between the amount recorded earlier in 
the books & now is transferred to Profit & Loss Account at the year end. 
For example: Goods purchased on 1st Jan, 2011 at $400, at that time the exchange rate was $1= 60 
Rupees. The amount recorded in the books was $24000 (i.e $400*60) but at the year end as on 31st 
March, 2011 the amount was still unpaid and the currency exchange rate has been increased to 62 
Rupees. The differences of 2 Rupees will be transferred to profit & loss account i.e liabilities are 
restated.

In what way is the accounting for a foreign currency borrowing more complicated than the accounting for a foreign currency account payable?

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