The Hindu Business Line : ICAI to ban part-time practice for members — Revised AS-15 to deal with VRS expenditure

THE Institute of Chartered Accountants of India (ICAI) has resolved to ban the part-time practice for its members. It has also made the Accounting Standard-26 inapplicable to VRS expenditure.

The ICAI President, Mr Sunil Goyal, told presspersons here on Tuesday that the institute reviewed the present system of granting certificate of practice to those members who were engaged in any other business/occupation other than the profession of accountancy as well as its implications.

Aimed at ensuring that the practice of profession was undertaken by the members who were able to devote full time to do justice with the complexities of the assignments and attended the responsibilities, the institute felt that the need of the hour was to strengthen the profession and to uphold the quality of attest function performed by the members.

"Accordingly, the council of the institute resolved that effective April 1 next year, those members of the institute who engage themselves in any business/occupation other than the profession of accountancy are not entitled to hold and/or obtain a certificate of practice," Mr Goyal said.

However, he said the members engaged in consultancy services and teaching assignments were entitled to hold and/or obtain a certificate of practice.

Stating that the modalities and mechanism for implementing the ban on part-time practice for its members were being currently worked out, Mr Goyal said, "There are sufficient number of full-time practice chartered accountants and such a restriction as aforesaid would have no adverse impact."

The institute has also approved the limited revision to AS-26, Intangible Assets, so as to make AS-26 inapplicable to expenditure in respect of termination benefits including VRS expenditure.

Mr Goyal said the industry represented ICAI that in International Accounting Standard (IAS) 38, which is the corresponding IAS to AS-26, the provisions related to VRS expenditure were not incorporated. Instead, they were incorporated in IAS-19 on `Employee Benefits' corresponding to which AS-15 titled `Accounting for retirement benefits in the financial statements of employers' is there in India.

According to Mr Goyal, while the expensing of VRS expenditure in the year in which it is incurred is in accordance with the international standards as above, the institute, on an overall consideration and keeping in view the fact that AS-15 is under revision, has decided to amend AS-26.

"Accordingly, the treatment of VRS expenditure would be dealt with by AS-15, which is under revision. It is expected that the revised AS-15 may include suitable transitional provisions allowing enterprises to follow the accounting policy of deferring the VRS expenditure for a specified period. The revised AS-15 is expected to be released in the near future," Mr Goyal said.

According to the ICAI President, the transition would give some respite to the industry, which is claiming to be in a disadvantageous position while passing through a restructuring phase. The limited revision to AS-26 is effective in respect of accounting periods commencing on or after April 1, 2003, the date from which AS-26 has come into effect, he said.

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