Amortization (Deferral) of FX Valuation
I am trying to map following scenario in TRM with product type 04X.
There are borrowings in foreign currency bonds (USD) with fixed interest rate. These were issued at discount which needs to be amortized over the period of bond. Also, Foreign currency valuation needs to be recorded and capitalized to FCMITDA account as required by Indian GAAP. This FCMITDA account should be amortized over the remaining period of bonds.
I have configured the system and I am also able to post FOREX valuation and amortization of Discount. However I am not sure whether I can amortize the FOREX valuation. Let me explain it with example:
There is Foreign Currency Bonds issued at nominal price USD 1,000,000 with Discount of 20,000 so the book value is 980,000. It was posted on 1st April @ 67 (USD to INR).
I am good with discount so no issues.
When we do valuation at any key date and rate is 66.50 there will be Exchange gain of INR 490,000 (980,000*.50). Following would be the accounting entry:
Dr Bonds A/c (Balance Sheet Account)
Cr FCMITDA A/c (Balance Sheet Account)
FOREX valuation is posted to FCMITDA account (As required by Indian GAAP). This amount (INR 490,000) has to be amortized (Deferred) to the remaining life of the bond. They do FOREX valuation on a quarterly basis and amortize it accordingly. Following accounting entry is passed for amortization:
Dr FCMITDA A/c
Cr Amortization - FX Gain/loss A/c (P&L Account)
There will be opposite entry if there is exchange loss.
I am not able to perform amortization of FCMITDA A/c in TRM.