The Hindu Business Line : Get all those ASIs ASAP

THE Archaeological Survey of India is ASI, so is American Sightseeing International, Actuarial Society of India and so forth. As a new jargon in the world of Indian accounting, ASI is Accounting Standards Interpretation, the work of a committee, naturally, and so the ASIC could share the honours with the Application Specific Integrated Circuit and the Australian Securities and Investments Commission, among others.

The Institute of Chartered Accountants of India gave its first ASI in the middle of last year, and after a lull of almost six months, there was a flush of four ASIs. Now, almost a year later, we have five new ASIs, and soon there should be a flood of these to outnumber the ASs themselves.

We always needed interpretations — to understand tough poetry and pithy prose, complicated law and jumbled judgments. Yet, queerly, seven out of the eleven ASIs try to explain something or the other of a particular AS, viz., 22 on taxes, leaving one to wonder whether they should rather be thinking of rewriting the standard itself.

Thankfully, the ASIs adopt a reader-friendly format of presenting the `issue' in brief, followed by the `consensus' and thereafter the elaborate `basis for conclusions'.

Among the fresh influx of ASIs is the issue of how deferred tax assets and deferred tax liabilities should be disclosed in the balance-sheet of a company.

This may sound too elementary for a casual reader who knows that any asset goes under the `assets' side and `liability' goes under the `liabilities' side.

Paragraph 30 of Accounting Standard (AS) 22, Accounting for Taxes on Income, states that deferred tax assets and liabilities "should be disclosed under a separate heading in the balance sheet of the enterprise, separately from current assets and current liabilities".

Since CAs were flummoxed where to plug in the figures, ASI-7 clarifies: "In case of a company, deferred tax assets should be disclosed on the face of the balance sheet separately after the head `Investments' and deferred tax liabilities should be disclosed on the face of the balance sheet separately after the head `Unsecured Loans'." There is an elaborate reasoning why it should be so, but one thing is clear: that accountants require a lot of hand-holding to do bookkeeping, and dotted lines with cross-marks indicating where to sign.

ASI-10 is about paragraph 4(e) of AS 16, `Borrowing Costs', which provides that borrowing costs may include "exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs". A good candidate, you may think, for being clarified.

The issue is which exchange differences are covered under this para. The answer: It covers "exchange differences on the amount of principal of the foreign currency borrowings to the extent of difference between interest on local currency borrowings and interest on foreign currency borrowings". If you are still not clear about the meaning, there is an appendix to ASI-10 to illustrate the application of the ASI-10 through a numerical example such as the ones that populate CA exam papers.

There are two ASIs to throw light on phrases such as `near future' and `virtual certainty supported by convincing evidence'. What does the ICAI say about these? `Near future' depends on "the facts and circumstances of each case" and `virtual certainty' is a "matter of judgment and will have to be evaluated on a case to case basis". That should lay those doubts to rest.

At this rate, however, it would be reasonable to expect a future ASI to explain something as fundamental as `left' and `right' this way: "Left and right are relative perceptions. For instance, debit is put on the left side of the paper, and credit on the right. However, if you stood on the same side as the paper, right would become left, and left would be right. Thus, it depends on where you stand." Understand?

hindubusinessline@hotmail.com

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