Revenue Recognition from Contracts Denominated in Foreign Currency
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- Last Updated on 10 November, 2023
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Para 46 of Ind AS 115, Revenue from contract with customers, requires that when (or as) a performance obligation is satisfied, an entity shall recognize as revenue the amount of the transaction price that is allocated to that performance obligation. Further para 21 of Ind AS 21, the Effects of Changes in Foreign Exchange Rates, A foreign currency transaction shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
Para 30 of Ind AS 21 requires when a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss shall be recognized in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss.
This story discusses a case study on how to recognize profit and loss due to foreign currency fluctuation on a non-monetary transaction recognizing revenue.
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