Amid India Inc lobbying hard for relaxation of the mandatory provisioning for forex losses and gains on the basis of market value of their financial assets in these times of volatility, a government advisory panel has suggested that it should not be enforced till 2011.
The country plans to converge to international accounting norms-- IFRS by 2011-- after which corporates will have to comply with them.
According to sources, the National Advisory Committee on Accounting Standard (NACAS) has proposed that Accounting Standard (AS) 11, which mandates mark-to-market (MTM) provisioning in the profit and loss account for foreign exchange-related gains and losses, should not be imposed on the firms till 2011.
However, the ICAI has a different view on the subject. According to the ICAI President Uttam Prakash Agarwal, "We are not interested in going for any changes in the regulation because we want consistency and prudence. Our council has a totally different view on it."
The proposal comes in midst of a controversy between industry and accounting body ICAI, which has been constantly demanding strict compliance with the provision by the companies.
However, the industry opines that with foreign exchanges demonstrating volatility for the past few months, they should be exempted from abiding by the regulation till the times are normal.
"They were reporting the forex fluctuations when there were gains. Now when they are having losses, they don't want to report," the sources added.
Industry bodies CII, Assocham and Ficci have been pitching for changes in the AS11 till the situation improves and have submitted proposals to the ministry of corporate affairs, according to sources.
Several companies are not following the AS11 norms and instead follow regulations of the Schedule VI of the Companies Act. As per the Act, any change in the repayment needs to be added or deducted from the cost of fixed assets due to exchange rate fluctuations.