1. Accounting Standard – 11
Sr.
No.
Facts Transaction
Accounting
purpose
Income Tax purpose
Pre-ICDS Post ICDS
1. Loan taken in foreign
currency and assets
bought from the
domestic market
Exchange
differences due
to capital
monetary items
Capitalized on
MTM basis.
Non-cognizable for the income-
tax purpose, i.e. gain is not
taxable, loss is not deductible/
allowable.
Allowable as
revenue item (i.e.
gain taxable & loss
deductible) on
MTM basis.
2. Forward contract for
the above loan
transaction
Premium on
Forward
exchange
contract
Capitalized
over the
period of
contract.
Non-cognizable for the income-
tax purpose, i.e. gain is not
taxable, loss is not deductible/
allowable.
Allowable as
revenue
expenditure over
the period of
contract.
Exchange
differences due
to forward
contract.
Capitalized on
MTM basis.
Non-cognizable for the income-
tax purpose, i.e. gain is not
taxable, loss is not deductible/
allowable.
Allowable as
revenue item (i.e.
gain taxable & loss
deductible) on
MTM basis.
4. Capital advances,
deposits and long
term loans and
advances to foreign
entities.
Exchange
differences on
repayment
Chargedto P&L
on MTM basis.
Non-cognizable for the income-
tax purpose, i.e. gain is not
taxable, loss is not deductible/
allowable.
Allowable as
revenue item (i.e.
gain taxable & loss
deductible) on
MTM basis.