Following settlement date accounting, the asset as well as the liability is recognized on the settlement date. Here the asset gets recorded only at the value at which it is actually settled, the difference between the cost of acquisition actually payable for such investment and the value at which it is recorded in the books of accounts being taken as realized gains on the date of acquisition itself. If the asset is held for trading then it is taken to the profit and loss account directly, and if the asset is an ‘available-for-sale’ asset then it is taken directly to the equity as ‘other comprehensive income’.
Even if the asset happens to be in foreign currency, since the asset is recorded only the date of settlement, the revaluation entries in the functional currency is recorded only at the rate at which it actually gets settled and hence there is no necessity to record any FX translation entries in this case.
Please enrol me for the free email course
on Basics of Accounting for Financial Instruments
Join our mailing list to receive the latest news and updates from our team.