ICAI recommends that companies be allowed to account for losses arising from foreign exchange derivative trade over several years

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Apex accounting regulator ICAI has recommended that companies be allowed to account for losses arising from foreign exchange derivative trade over several years. The measure, according to sources, would prevent the companies from showing huge notional losses, which they have suffered on account of exposure in forex derivative market.

“Implementation of AS-11 is recommended to be extended until the loan repayment is complete,” Institute of Chartered Accountants of India (ICAI) President G Ramaswamy said, adding that the industry has been demanding for the relaxation.

The ICAI today discussed the issue with National Advisory Committee on Accounting Standard (NACAS), a government- appointed body, to formulate accounting norms.

Earlier in 2009, the ICAI had deferred the implementation of Accounting Standards 11, which deals with accounting for financial assets on mark-to-market basis, till March, 2011.

“The contracts entered into after April 1, 2011, would also be provided for several areas. The move would benefit a large number of companies,” Ramaswamy said.

Companies will have an option to show the forex loss or gain as per AS 11 or Schedule VI of the Companies Act.

In 2011, India was to converge with the international reporting norms, IFRS, as per which the companies will have to compulsorily report mark-to-market losses and gains.

However, the implementation of the decision has been deferred till April 2013.