ICAI's fresh accounting standards by 2007

Corporate India will soon have a fresh dose of accounting standards from the Institute of Chartered Accountants of India.

The institute is preparing accounting standards to deal with insurance contracts, agriculture business, investment property and share-based payments, which are expected to come in force over the next one year.

"It will take up to one year for all these standards to become applicable," TN Manoharan, who recently took over as president of the ICAI, said.

First off the block will be the accounting standard on presentation of financial instruments, which is equivalent of the International Accounting Standard (IAS) 32.

"The other two accounting standards on financial statement that are being prepared are on recognition and measurement of financial statements and disclosures in financial statements," Manoharan said.

The standard dealing with recognition and measurement is equivalent of IAS 39, while the one on disclosure is on the lines of International Financial Reporting Standard (IFRS) 7. These standards on financial instruments are expected to become applicable in the next 4-5 months.

With more and more Indian companies acquiring companies abroad and foreign companies setting up Indian subsidiaries, ICAI is working towards convergence of Indian accounting standards with the global norms.

"We want to ensure that Indian businesses going abroad and foreign business setting shop in India should have the best accounting framework in the form of Indian accounting standards," he said.

The standard on agriculture will also deal with accounting for livestock and help bring accountability in the farm sector.

"With the insurance industry growing at a rapid pace, the time is right for a comprehensive accounting standard on insurance contracts," he said.

The accounting standard on share-based payment, equivalent of IFRS 2, will specify how consideration in form of shares are to be valued and treated.

ICAI has already issued a guidance note for accounting for employee stock options. The accounting standard on investment property will deal with accounting for trading in real estate.

ICAI's revised accounting standard on retirement benefit comes into effect from April 1, 2006.