AS11 applicability on foreign transaction?
One of the client paid advance in foreign to a foreign supplier.
Advance was made in Jan 2014. Expected date of delivery of goods in June 2014.
How should we treat this advance in books as per AS-11?
What should be cost of Inventory when goods are received in June?
As per EAC opinion,
where the advance is made for a receipt of a specified quantity of goods, it will be a non-monetary asset since it represents a claim to receive a specified quantity of goods and not a right to receive money.
Hence the above advance paid is a non monetary asset.
Whether these exchange differences can be adjusted in the cost of Inventory, the answer is affirmative as all the costs directly attributable cost of bringing the asset to its working condition for its intended use have to be inventoried .