Profit Overstated By Rs 49 Cr

Bank of Indias profit for the year ended March, 1996, and the half year ended September 30, 1996, has been overstated by Rs 49.49 crore and Rs 9.14 crore respectively as a result of change in accounting policies since, according to the auditors of the bank.

Also, profit before tax for the year ended March 31, 1995, has been understated by Rs 58.73 crore.

Prior to the financial year ending 1995, BoI pursued accounting standard 11 (AS-11) of the Institute of Chartered Accountants of India. Under the norms, exchange gains arising out of translation of current assets and current liabilities, and income and expenditure of its foreign branches is to be charged to P&L account.

However, since March 31, 1995, the bank has opted to charge exchange rate gains /losses to the Exchange Fluctuation Reserve Account.

BoI chairman and managing director G Kathuria said, The bank, by charging exchange rate fluctuation to the reserve account and not to the P&L account, is in fact attempting to arrive at a true and fair profit figure. This is because, exchange rate gains/losses usually accrue in a subsequent financial year because of the holding period involved. Hence, under AS-11, the profits are seldom realistic, he said.