ICAI norm for Indian subsidiaries

In a move that would bring standardisation in financial reporting by unlisted Indian subsidiaries of foreign companies, these subsidiaries would be required to comply with the Institute of Chartered Accountants of India's (ICAI) accounting standards if the foreign parent, listed outside India, is required to prepare its financial statements as per Indian accounting practices.

ICAI has also issued a clarification on Accounting Standards (AS) related to Construction Contracts, Accounting for Taxes on Income in case of tax holidays and Segment Accounting.

The need to bring unlisted subsidiaries of foreign company under the accounting standards was felt in the context of applicability of standards. to small and medium enterprises issued by ICAI. in November 2003.

As the AS is applicable to 'Level 1' enterprises which includes, firms whose equity or debt is listed in India or outside. ICAI said that the amount of contract revenue recognised in the profit and loss account should be considered as turnover.

The turnover forms the basis of determining the applicability of the AS to a small and medium sized enterprise (SME).

In order to bring consistency in the tax treatment arising out of timing difference in case of firms enjoying tax holiday under section 80-IA and 80-IB, ICAI has clarified that the no deferred tax should be recognised in respect of timing difference originating during the tax holiday period or before the tax holiday period, if the same is reversed during the tax holiday period.

In a disclosure related revision to AS 17 on segment reporting, ICAI has specified that in case a firm has only one segment, it would have to disclose the fact that the segment wise information is not provided as the firm has only one business segment and only one geographical segment.

Accounting standards if the foreign parent, listed outside India, is required to prepare its financial statements as per Indian accounting practices. ICAI has also issued a clarification on Accounting Standards (AS) related to Construction Contracts, Accounting for Taxes on Income in case of tax holidays and Segment Accounting.

The need to bring unlisted subsidiaries of foreign company under the accounting standards was felt in the context of applicability of standards to small and medium enterprises issued by ICAI, in November 2003.

As the AS is applicable to 'Level 1' enterprises which includes, firms whose equity or debt is listed in India or outside. Clarifying as to how the turnover of the contractor would be computed in AS 7 on construction contracts, ICAI has said that the amount of contract revenue recognised in the profit and loss account should be considered as turnover. The turnover forms the basis of determining the applicability of the AS to a small and medium sized enterprise (SME).

In order to bring consistency in the tax treatment arising out of timing difference in case of firms enjoying tax holiday under section 80-IA and 80-IB, ICAI has clarified that the no deferred tax should be recognised in respect of timing difference originating during the tax holiday period or before the tax holiday period, if the same is reversed during the tax holiday period.

In a disclosure related revision to AS 17 on segment reporting, ICAI has specified that in case a firm has only one segment, it would have to disclose the fact that the segment wise information is not provided as the firm has only one business segment and only one geographical segment.