Amid global financial pressures, the Ministry of Corporate Affairs has pressed for expeditious notification of standards on financial instruments such as derivatives. This is to ensure that companies make proper disclosure of such exposures in their account books.
“The ministry has asked the National Advisory Committee on Accounting Standard (NACAS) to speed up the work on the notification of AS 30, 31 and 32. And, probably within a month’s time, it will have a final meeting on these standards,” a senior ministry official said.
Accounting Standards (AS) 30, 31 and 32 pertain to recognition, measurement and presentation of financial instruments such as derivatives, loans, receivables and bonds — both held to maturity category and available for sale.
These standards, recommendatory in nature till 2011, after which it will become mandatory, will need companies to make disclosures of such instruments in their financial statements.
The ministry has sought the Reserve Bank of India’s advice on the transition period, because banking and non-banking financial companies and financial institutions would be the most affected after the notification of standards, the official added.
The exposure of India Inc in the global financial crisis is not large. So, at present, the ministry is not mulling on making these standards mandatory from inception, the official said.
Multi-layered derivatives caused erstwhile gigantic financial institutions in the United States to pack up and it is still not clear what the total amount of loss due to the financial crisis would be and which other institutions would succumb to it.
The apex body for accounting in the country, the Institute of Chartered Accountants in India, said that in view of the recent financial crisis, it would welcome the early adoption of these standards as that would strengthen the disclosure practice.
