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| MCA clears AS-11 proposal |
| BS Reporter / New Delhi Apr 02, 2009, 00:49 IST |
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The Ministry of Corporate Affairs (MCA) has accepted the recommendation of an advisory body to defer the implementation of Accounting Standard 11 (AS-11), which deals with differences in foreign exchange rates, till 2011.
The decision will benefit corporate India as losses incurred due to foreign exchange market fluctuations need not be deducted against profits of the company for another two years.
“The government has notified the deferment of AS-11 to 2011,” said a senior official of the MCA on condition of anonymity. Last week, the National Advisory Committee on Accounting Standards (NACAS), an independent advisory board under the MCA, had recommended deferring AS-11 to 2011.
The MCA had referred the issue to NACAS on industry’s request, which is facing huge losses in the face of ongoing financial meltdown and depreciation of the rupee.
The Institute of Chartered Accountants of India (ICAI), the apex body regulating the profession of chartered accountancy in India, has not been in favour of deferment of AS-11, which it had issued in 2004.
Several big companies are not following it and are instead complying with Schedule VI of the Companies Act, which allows companies to adjust losses or gains against the value of assets in the balance sheet.
The government had referred AS 11 issue to NACAS because there were certain problems needed to be resolved, like controversy around Schedule VI and AS-11. Also, since the Rupee had depreciated by over 20 per cent over the past few months, companies had been booking losses over the past few quarters and had sought relaxation in mark-to-market (MTM) provision to book the losses till the loans matured.
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