Measures initiated by ICAI for revisiting Accounting Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates
CA. Uttam Prakash Agarwal, President, The Institute of Chartered
Accountants of India (ICAI) re-iterated the Institute's desire to work closely with
Industry and Government in both framing and revising Accounting Standards. He briefly
outlined the measures initiated by ICAI for revisiting Accounting Standard (AS)
11, The Effects of Changes in Foreign Exchange Rates.
Chronological order of discussions relating to Revision in Accounting Standard
(AS) 11
Accounting Standards Board meeting (148) held on 1 February, 2009
A Working Group was set up for review of accounting treatment of monetary items
under AS 11 on the matter being referred by National Advisory Committee on Accounting
Standards (NACAS)
Working Group of meeting on AS 11 held on 16 February, 2009
- Discussed modalities for revision in accounting treatment.
Working Group meeting on AS 11 held on 2 March, 2009
- Discussed modalities for revision in accounting treatment.
Meeting at Ministry of Corporate Affairs Office on 4 March, 2009
There were discussions on various issues related to AS 11. The meeting was attended
by President, Vice President and Director of the Institute. Mr. Jitesh Khoslas
presence was requested at the Accounting Standards Board meeting the next day but
he regretted his inability to attend due to other preoccupations.
Accounting Standards Board meeting (149) held on 5 March 2009
Two senior ministry officials were present at the meeting. Discussions on revision
to AS 11 could not be concluded as two diverging views were there on the matter.
Industry Representatives gave presentation to the Board on their views. The meeting
decided to refer the matter to the Council with both points of view on the matter
as in technical matters there was a convention of seeking unanimity.
Council Meeting held on 6,7 & 8 March 2009.
The item relating to revision of AS 11 for long-term monetary items was introduced
as an additional agenda item in view of its importance to Industry and the need
for providing clarity in accounting treatment for the year ended 31 March 2009.
Joint Secretary, Government of India along with other government nominees were present
and participating. On the question of a member of the Council as to whether the
matter under consideration was of revision of the standard or a discussion on the
pros and cons of revision Mr.Jitesh Khosla confirmed it was a process of discussion.
The matter thereafter was on the council table for discussion. The council discussed
the matter for over 2 1/2 hours as members had strong concerns on the gravity of
revising the accounting standard.
As the matter warranted further deliberations to address the concerns of members
it was decided that the matter would be referred back to the Accounting Standards
Board. It was also decided that a process of discussion would be taken up with industry
representatives in the presence of Mr.Jitesh Khosla and a tentative date of 18 March
2009 was fixed for a meeting at Mumbai.
As on that date,CII had organised a seminar on IFRS where President ICAI, Vice President
ICAI and Mr.Jitesh Khosla Joint Secretary Government of
National Advisory Committee on Accounting Standards (NACAS) meeting on 24
March, 2009.
The meeting was attended by President ICAI, Vice President ICAI, Chairman Accounting
Standards Board ICAI. The meeting was also attended by representatives of the
CA. Uttam Prakash Agarwal, President Institute of Chartered Accountants of India
explained all the steps taken by the Institute in this matter to arrive at a consensus
decision. He also informed the meeting that there was a process involved both in
the issuing of accounting standards as well as revising any standard. He stressed
the need that the request of Industry for a revision to the accounting standard
be examined in the context of the principles of consistency, prudence and going
concern basis so that such action was in the best interest of all concerned. He
also pointed out that fluctuation in foreign currency and volatility in foreign
exchange markets were a given factor today. There was a mechanism of hedging against
the risk of foreign currency fluctuation and it was in fact a failure of business
houses decision-making process. He apprised Chairman NACAS of the various questions
which had to be addressed such as whether this would require any amendment to the
Companies Act as there was a contradiction between Schedule VI and AS? Whether this
would amount to a deviation from IFRS? Are we going to defer convergence with IFRS?
Whether the change will be specifically to the benefit of a group of people? Would
this amount to distribution of losses? Is this an extraordinary circumstance? There
has been a criticism that when it came to taking profits, Industry booked it, while
when it comes to losses, Industry is approaching for changes. What are the hardships
faced by the Industry? What is the impact on the share value? Is this going to be
beneficial to the shareholders?
On the issue of certain comments made by Chairman NACAS on CNBC channel, President
ICAI stressed that the Institute of Chartered Accountants of India had all along
taken a very proactive role in the matter so that problems of industry could be
resolved and that all the members of the Council were in support of the process
initiated for the purpose of revision to the accounting standards.
About ICAI
The Institute of Chartered Accountants of India (ICAI) set-up by an Act of Parliament
viz. The Chartered Accountant Act, 1949 to regulate the profession of Chartered
Accountancy is the second largest and prominent accounting body in the world. It
has been taking various proactive measures from time to time, aligned with the changing
facets of the Indian economy, for continuously raising the standard of quality of
accounting and financial reporting. The quality of education and the standards of
examination of the Institute are acknowledged to be the best in the world.
ICAI has its Headquarters at New Delhi with 5 Regional Offices at Mumbai, Chennai,
Kanpur, Kolkata, New Delhi and 118 branches spread all over the country. In addition,
it has also set up 21 chapters outside
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