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Rule 273 - Exchange Variation | KartavyaDesk

GFR 2017

Original Rule Text

Rule 273 Accounting of exchange variation. The exchange variation in respect of foreign loans that have been fully repaid shall be adjusted written off to “8680- Miscellaneous Government Accounts - Write off in terms of Government Accounting Rules and the procedures prescribed by CGA in consultation with CAG.

What This Means

Rule 273 of the General Financial Rules (GFR), 2017 deals with how to handle gains or losses due to changes in currency exchange rates when foreign loans are completely paid off. Imagine the government borrows money in US dollars. By the time the loan is repaid, the value of the rupee against the dollar might have changed. This difference, known as 'exchange variation,' needs to be accounted for.

This rule specifies that any such exchange variation (gain or loss) on fully repaid foreign loans should be adjusted or written off. The adjustment is done under a specific accounting code: '8680- Miscellaneous Government Accounts - Write off in terms of Government Accounting Rules.' The Controller General of Accounts (CGA) prescribes the procedures for this write-off, in consultation with the Comptroller and Auditor General (CAG). This ensures transparency and proper accounting of these financial adjustments.

In essence, Rule 273 provides a clear guideline for government departments and agencies on how to manage the financial impact of currency fluctuations related to foreign loans once those loans are fully settled. It ensures that these variations don't distort the government's financial statements and are accounted for in a standardized manner.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Applies only to fully repaid foreign loans.
  • •Deals with exchange variation (gains or losses due to currency fluctuations).
  • •Requires adjustment/write-off of the exchange variation.
  • •Adjustment is done under accounting code '8680'.
  • •Procedures are prescribed by CGA in consultation with CAG.

Practical Example

The Ministry of Infrastructure Development took a loan of $10 million from the World Bank in 2010 for a highway project. At the time, the exchange rate was ₹45 per dollar. The loan was fully repaid in 2020. However, by 2020, the exchange rate had changed to ₹75 per dollar. This means the Ministry had to spend more rupees to repay the same amount of dollars.

The difference between the initial exchange rate and the final exchange rate resulted in an exchange variation loss. According to Rule 273, this loss is not directly charged to the project but is written off to '8680- Miscellaneous Government Accounts' following the procedure prescribed by the CGA in consultation with the CAG. This ensures the project's financial performance isn't unfairly burdened by currency fluctuations after its completion.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What happens if the exchange rate change results in a gain instead of a loss?▼
The rule applies to both gains and losses. Any exchange variation, whether a gain or a loss, is adjusted/written off to '8680' following the prescribed procedures.
Who is responsible for determining the exact amount of the exchange variation?▼
The concerned department or agency responsible for repaying the loan is responsible for calculating the exchange variation based on the prevailing exchange rates at the time of borrowing and repayment. This calculation is subject to audit.
Where can I find the specific procedures prescribed by the CGA for this write-off?▼
The procedures are typically outlined in circulars and notifications issued by the Controller General of Accounts (CGA). These are usually available on the CGA's official website or through internal communications within government departments.
Does this rule apply to loans taken from domestic sources in foreign currency?▼
Yes, this rule applies to all foreign loans, irrespective of whether the lender is a domestic or international entity.
What is the significance of consulting with CAG in this process?▼
Consultation with the Comptroller and Auditor General (CAG) ensures transparency and accountability in the accounting of exchange variations. It helps maintain the integrity of government accounts and prevents any misuse of funds.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Rule 273 of GFR 2017, exchange variation in respect of foreign loans is adjusted/written off under which accounting code?

Related Rules

Rule 271General Financial Rules 2017 (amended July 2024) - Rule 271 - Chapter 10Rule 109General Financial Rules 2017 (amended July 2024) - Rule 109Rule 146General Financial Rules 2017 (amended July 2024) - Rule 146 - Chapter 6Rule 169General Financial Rules 2017 (amended July 2024) - Rule 169 - Chapter 6Rule 215General Financial Rules 2017 (amended July 2024) - Rule 215 - Chapter 6

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