The Institute of Chartered Accountants of India or the ICAI has urged companies to reveal their mark to market (MTM) losses of all outstanding derivative contracts, in their balance sheets this quarter.
The ICAI has said that the companies should reveal their mark-to-market losses of all outstanding derivative contracts under AS 30 norms (Accounting Standard) norms. If these are not revealed under AS 30 norms, they should reveal the losses under the Principle of Prudence.
Currently companies do not need to reveal MTM losses on account of derivatives. The ICAI wants the companies to provide for the losses. The auditors should ask companies to disclose losses, the ICAI has said.
Explaining the implications of this ruling, Viren Mehta, Director, Ernst & Young India said this announcement has encouraged companies to adopt AS30 early. “What the ICAI has essentially done is to throw some more light on the financial instrument that companies are carrying and encouraging them, either to do an AS 30 or at least do a mark-to-market using the Principles of Prudence, and then record these in your financial statements,” he explained.
Bit of dents to be seen in profit of cos after ICAI rulingSource : CNBC-TV18 CNBC-TV18’s Executive Editor, Udayan Mukherjee
- I think the market will be quite nervous about the ICAI ruling because there was a feeling that some companies will defer it, till conditions improve in the stock market and then slowly sneak through one or two of the hits, which they have undertaken. But now the ICAI is saying that you guys have to provide for it in the current quarter as a couple of companies have done already to the detriment of the stock price that we have seen last week.
I suspect that you will see more skeletons tumbling out of the closet in this current quarter itself, now. Whether it happens in the month of April or it happens with the audited numbers in the June, is a matter of debate and discussion.
But I suspect you will see quite a bit of dents in the bottomline in many of the companies and many of the midcap companies, I imagine would probably have a lot of scars to bear. So this is not a good thing on the margin it makes the markets nervous again going into this week straight, the possibility of profits being eroded because of the new ICAI ruling.
Friday closed on a very promising note and that’s the sad way that you saw participation, you saw the market defying inflation data and closing at a good level and you are hopeful that the market will now move up. This morning again the headwinds build up, inflation and the reaction to inflation from all quarters don’t look very good. You have got ICAI and the possibility of corporate profits getting dented, global markets are somewhat on the softer side and all of this, will probably be just additional straws on the market’s back in its way up. It can still move up but it will find just a little more difficult with each of these news flow items, which have come in.
The ICAI has said that the companies should reveal their mark-to-market losses of all outstanding derivative contracts under AS 30 norms (Accounting Standard) norms. If these are not revealed under AS 30 norms, they should reveal the losses under the Principle of Prudence.
Currently companies do not need to reveal MTM losses on account of derivatives. The ICAI wants the companies to provide for the losses. The auditors should ask companies to disclose losses, the ICAI has said.
Explaining the implications of this ruling, Viren Mehta, Director, Ernst & Young India said this announcement has encouraged companies to adopt AS30 early. “What the ICAI has essentially done is to throw some more light on the financial instrument that companies are carrying and encouraging them, either to do an AS 30 or at least do a mark-to-market using the Principles of Prudence, and then record these in your financial statements,” he explained.
Bit of dents to be seen in profit of cos after ICAI rulingSource : CNBC-TV18 CNBC-TV18’s Executive Editor, Udayan Mukherjee
- I think the market will be quite nervous about the ICAI ruling because there was a feeling that some companies will defer it, till conditions improve in the stock market and then slowly sneak through one or two of the hits, which they have undertaken. But now the ICAI is saying that you guys have to provide for it in the current quarter as a couple of companies have done already to the detriment of the stock price that we have seen last week.
I suspect that you will see more skeletons tumbling out of the closet in this current quarter itself, now. Whether it happens in the month of April or it happens with the audited numbers in the June, is a matter of debate and discussion.
But I suspect you will see quite a bit of dents in the bottomline in many of the companies and many of the midcap companies, I imagine would probably have a lot of scars to bear. So this is not a good thing on the margin it makes the markets nervous again going into this week straight, the possibility of profits being eroded because of the new ICAI ruling.
Friday closed on a very promising note and that’s the sad way that you saw participation, you saw the market defying inflation data and closing at a good level and you are hopeful that the market will now move up. This morning again the headwinds build up, inflation and the reaction to inflation from all quarters don’t look very good. You have got ICAI and the possibility of corporate profits getting dented, global markets are somewhat on the softer side and all of this, will probably be just additional straws on the market’s back in its way up. It can still move up but it will find just a little more difficult with each of these news flow items, which have come in.
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