Companies raising funds through public issues this financial year have got a breather from filing financial statements under the new format, which includes disclosures about notional gains and losses due to exchange rate fluctuations.
The new format was prescribed by the Ministry of Corporate Affairs (MCA) in February this year and it came into effect from the beginning of this financial year.
However, now the MCA has granted exemption from filing financial accounts under the new format to companies coming out with initial public offers or follow-on public offers (IPOs/FPOs) in 2011-12.
The exemption would, however, be limited to IPOs/FPOs alone, as companies would have to submit their annual financial statements for the year under the new format, the ministry said.
The exemption will allow the companies seeking to generate public funds to escape making several mandatory disclosures, such as the notional gain and loss on account of exchange rate volatility.
The new format prescribes separate disclosures of such mark-to-market gains/losses and a special mention of provisions made towards losses of subsidiaries, details of exceptional and extraordinary items, etc.
The new format was meant to bring more financial disclosures within the balance sheet and profit and loss account for converging Indian accounting practices with the International Financial Reporting Standards (IFRS).
The new form and content of the balance sheet and the profit and loss account stipulates a separate mention of current assets, goods in transit, and classification of assets as tangible and non-tangible.
The MCA circular, sent to all regional directors, the registrar of companies and official liquidators recently, stated the exemption was granted in view of the “enormous administrative work and difficulty” companies would face due to the reclassification of accounts. The circular also mentions such changes also make comparison with the previous year’s financial performance unrealistic.
Notably, the government has already deferred the implementation of new Indian Accounting Standards, which converge with the IFRS. Even though the new accounting standards have been notified, the government is yet to sort out several allied issues, including the tax calculation, etc, to put the new norms to practice.
