AS -30 awaits panel approval

Companies can continue with their existing accounting practice on derivatives as the Centre is yet to notify a new set of accounting standards (AS) for the purpose.

The Ministry for Corporate Affairs (MCA) is awaiting recommendation by the National Advisory Committee on Accounting Standards (NACAS) on standards for Financial Instruments (Recognition and Measurement) or AS-30.

A senior Ministry official told Business Line that, “The Institute of Chartered Accountant of India (ICAI) formulated AS-30 has been referred to NACAS. And once NACAS recommendations come it would be notified.”

AS-30 establishes principles for recognition, de-recognition and measurement of financial instrument. In other words, it lays down the principles that would determine the manner in which financial instruments such as options and other derivatives should be measured and recognised in the balance sheets of banks and companies.

Meanwhile, the central council of ICAI is understood to have at its meeting held here on Thursday approved the Accounting Standard on disclosure of Financial Instruments (AS-32).

Recognising the importance of financial reporting in providing essential financial information about the company to its shareholders and other stakeholders, the Government prescribes the accounting standards in consultation with NACAS. A body of experts including representatives of various regulatory bodies and Government agencies, NACAS is engaged in examining the standards prepared by the ICAI for use by the corporates.

The ICAI council in October last year approved AS-30, which deals with Financial Instruments: Recognition and Measurements, and AS-31, which prescribes for Financial Instruments: Presentation. The Standard is to come into effect for accounting periods commencing on or after April 1, 2009, and will be recommendatory in nature for two accounting years. It will become mandatory for corporates from accounting year beginning April 1, 2011.

Instruments classification

For the purpose of AS-30, financial instruments are classified into financial assets or financial liabilities at fair value through profit or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets and other financial liability. While, AS-30 also establishes principles for hedge accounting, AS-31 is for presenting financial instruments as liabilities or equity and related principles of interest, dividends, losses and gains.

The principles in this Standard complement the principles established in AS-30. AS-30 and AS-31 are based on the corresponding International Accounting Standards — IAS 39, Financial Instruments: Recognition and Measurement and IAS 32, Financial Instruments: Presentation — respectively. There are no material differences between AS 30 and IAS 39, and AS 31 and IAS 32.

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