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Just too many bones to number and fix

D. Murali

ASI, we all know, is Archaeological Survey of India. But why is ASI doing the rounds in the Institute of Chartered Accountants of India? Not because the Department of Company Affairs is intent on burying the autonomy of the ICAI and so it needs to be excavated again, but because the abbreviation has been adopted by the Institute for `Accounting Standards Interpretation'. One may wonder why they did not choose IAS; but that has already been captured by International Accounting Standards.

Viewed differently, ASI is quite apt because the experts in the Institute are digging up fresh meanings in their standards and numbering all their findings, just as you would have seen archaeologists do on the National Geographic channel.

The latest to be posted on the Web site of the ICAI, and also carried in March 2004 issue of The Chartered Accountant, are ASIs 12 to 28. About any ASI, you need to remember three things: It is as authoritative as the Accounting Standard to which it relates; it relates only to the AS it seeks to interpret; and it applies to material items. For the uninitiated, interpretation is the act or process of interpreting; it is an explanation of what is obscure, such as interpretation of a foreign language or dream, a court judgment or politician's statement.

The Department of Fine Arts, Okanagan University College, gives an elaborate description for `interpretation': "Generally speaking, post-modern discourse insists that interpretation is a relatively free process of producing meaning in cooperation with a text, rather than simply deriving it slavishly from a work to which one is chained." Mary Ann Caws would, however, say that `interpretare' means "to find oneself indebted to". That is, "inter" from the Latin for "amidst, among, between, during, mutually, reciprocally, together"; and "pretation" comes from the Latin "praesto" for "at hand, present, ready." Interpretation, in NATO's intelligence usage, is "the final step in the processing phase of the intelligence cycle in which the significance of information and/or intelligence is judged in relation to the current body of knowledge."

Friedrich Nietzsche had said: "There are no facts, only interpretations." The sheer volume of interpretations could justify that quote, but that's only one of the problems.

There are simply too many exits and entrances. For instance, pursuant to the issuance of ASI 12, which is about AS 20, "General Clarification (GC) - 1/2002, issued in March 2002 stands withdrawn". Ditto with most other ASIs.

It cannot be denied that ASIs serve the purpose of answering questions. But not all are as simple as "whether a non-executive director is a key management person". Many questions would need interpretations themselves. Take ASI 22's second issue: "In case interest is included as a part of the cost of inventories where it is so required as per Accounting Standard (AS) 16, Borrowing Costs, read with Accounting Standard (AS) 2, Valuation of Inventories, and those inventories are part of segment assets of a particular segment, whether such interest would be considered as a segment expense." Likewise, ASI 24's issue is: "In case an enterprise is controlled by two enterprises — one controls by virtue of ownership of majority of the voting power of that enterprise and the other controls, by virtue of an agreement or otherwise, the composition of the board of directors so as to obtain economic benefits from its activities — whether in such a case both the controlling enterprises should consolidate the financial statements of the first mentioned enterprise."

Try ASI 17 for some esoteric discussion if you have skipped your Zen classes. Disciple asks: "Master, The issue is as to how the adjustments to the carrying amount of investment in an associate arising from changes in the associate's equity that have not been included in the statement of profit and loss of the associate, should be made." Master replies: "Adjustments to the carrying amount of investment in an associate arising from changes in the associate's equity that have not been included in the statement of profit and loss of the associate should be directly made in the carrying amount of investment without routing it through the consolidated statement of profit and loss." The disciple asks: "How, master?"

Reply: "Adjustments to the carrying amount of an investment in an associate are made for alterations in the investor's proportionate interest in the investee arising from changes in the investee's equity that have not been included in the statement of profit and loss. In respect of the corresponding effect of such adjustments, it is not appropriate to route the same through the consolidated statement of profit and loss since the relevant item has not been recognised by the associate in its statement of profit and loss." Enlightening.

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