AS 11 Foreign Currency: Reconcile Invoice, Settlement and Closing

A USD invoice is partly settled before year-end and the balance remains outstanding. The useful result is a working that explains the facts, the calculation or classification, and the evidence behind the conclusion. This guide shows how to prepare that working and where a reviewer should investigate before accepting the result.

Scope and applicable period

Financial reporting for FY 2025–26 under the applicable Accounting Standards (AS) framework. Assess entity-specific applicability and relief. Ind AS requirements are a separate analysis.

Verification date: 11 October 2026. Figures and rates identified as assumptions are teaching examples; apply the stated conditions and the actual facts to a real assignment.

The key principle

AS 11 distinguishes initial recognition, settlement and closing translation. Monetary items such as an outstanding foreign-currency trade receivable need the applicable closing-rate treatment. Non-monetary items are not all translated using that same rule. Keep foreign-currency quantities intact alongside INR figures so rate movements and receipts can be reconciled. Specific exceptions and classifications require separate assessment.

Worked example

In the simplified trade-receivable case, settlement and closing translation produce separate exchange movements of ₹6,000 and ₹8,000. Track receipts by currency rather than applying one average INR amount to every invoice. Reconcile the remaining USD 4,000 to customer records and the ₹3.36 lakh closing carrying amount to books. The accounting exchange movement does not automatically answer income-tax or transfer-pricing questions about the same transaction.

A practical sequence

Identify monetary and non-monetary items and collect the exchange rates relevant to transaction, settlement and closing dates. Reconcile foreign-currency balances to invoices and bank records.

Apply the applicable AS 11 treatment and any relevant exceptions before recording exchange differences. Keep realised settlement movements separate from closing remeasurement in the working.

Do not use one average rate for every item merely to make the books agree with a converted bank total.

Choose the framework before drafting the note

Recognition, measurement, presentation and disclosure are related but distinct. First establish whether the entity follows AS or Ind AS and whether company Schedule III or ICAI non-corporate guidance governs presentation. Then determine the accounting treatment and assemble the applicable disclosure. A well-formatted note cannot cure an unsupported asset, liability or income figure. Reconcile note schedules to the trial balance and preserve comparative information. Where relief applies to an entity, assess the particular standard or guidance rather than assuming that small size removes every requirement. Record significant judgement with the supporting facts.

Evidence checklist

Keep the following records linked to the same entity, period and working version. Identify missing items explicitly; a checked box should mean the document was examined and supports the stated conclusion.

• Currency-wise invoice register
• Initial recognition rate and date
• Receipt and bank conversion evidence
• Closing balances and rate support
• Exchange movement and framework assessment

Common mistakes and how to avoid them

• Translating all assets with one closing-rate rule. Compare the conclusion with the currency-wise invoice register and resolve any conflicting facts.
• Losing the original foreign-currency balance. Trace the affected item to the receipt and bank conversion evidence before finalising the working.
• Combining accounting and tax treatment without separate analysis. Use the exchange movement and framework assessment to make the final position and remaining exceptions clear.

Before you finalise

Recheck the example’s assumptions against the actual assignment, resolve the identified exceptions and make the final figure or conclusion traceable to its source. Preserve the reviewed version and the reason for material changes. For this task, the exchange movement and framework assessment should agree with the conclusion presented to the client, reviewer or authority.

Frequently asked question

Should realised and closing exchange differences be separately tracked? Yes. Their reconciliation uses different events and should remain reproducible.

Sources and further reading

• ICAI Accounting Standard AS 11
• ICAI AS 1 — Disclosure of Accounting Policies

Related guide: Intercompany loans receivables transfer pricing data review.