All Scheduled Commercial Banks
(excluding Regional Rural Banks)
Madam / Dear Sir,
Guidelines on compliance with
Accounting Standard (AS) 11 [The Effects of Changes in Foreign Exchange
Rates] by banks - Clarification
Please refer to circulars
DBOD.No.BP.BC.76/21.04.018/2004-05 dated March 15, 2005 and DBOD.BP.BC.No.76/21.04.018/2005-06
dated April 05, 2006 on the captioned subject.
2. It has been observed that
banks have been recognizing gains in profit & loss account from Foreign
Currency Translation Reserve (FCTR) on repatriation of accumulated profits
/ retained earnings from overseas branch(es) by treating the same as
partial disposal under AS 11.
3. The matter has been examined
taking into consideration, inter alia, the views of the Institute of
Chartered Accountants of India. It is clarified that the repatriation of
accumulated profits shall not be considered as disposal or partial disposal
of interest in non-integral foreign operations as per AS 11 The
Effects of Changes in Foreign Exchange Rates. Accordingly, banks shall
not recognise in the profit and loss account the proportionate exchange
gains or losses held in the foreign currency translation reserve on
repatriation of profits from overseas operations.
Chief General Manager-in-Charge