ICAI for early adoption of new accounting norms

NEW DELHI: The country's accounting regulator, Institute of Chartered Accountants of India (ICAI), clarified on Monday that its announcement on derivative accounting was to ensure that companies report their estimated losses from foreign currency derivatives as per already existing norms. The regulator said it has not advanced the compliance date for the new accounting norms on financial instruments, although it would encourage early adoption. ICAI said that it has no problem if other regulators-SEBI or RBI-want an early implementation.

Adopting the new standard on financial instruments-AS 30-would allow companies to provide for future gains as well as losses on foreign currency derivatives as per their fair market value, while following the existing norm of accounting prudence-AS 1-will force them to provide for only losses and not gains. That is if they do not adopt the new standards, they will not have the flexibility to provide for future gains. Therefore, net profit may be lower. Corporate houses are expected to make their balance sheets this way even now, but many had doubts after ICAI recently brought in AS 30.

ICAI officials told reporters on Monday that it received queries from various quarters on whether corporate houses need to disclose their exposure to derivative instruments now since the accounting standard covering them need to be compulsorily followed only three years from now.
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