The Hindu Business Line : Standard soon on `employee share-based payments': ICAI

IN keeping with the international practice, the Institute of Chartered Accountants of India (ICAI) intends to come up with an accounting standard (AS) on `employee share-based payments.' The draft of the accounting standard has been finalised by the Accounting Standards Board (ASB) of the Institute recently, Mr Sunil Goyal, President, ICAI, said here on Saturday. A month ago, the Institute had finalised a guidance note on `accounting for employee share-based payments.' The decision to have an AS for share-based payments comes at the behest of the Securities and Exchange Board of India (SEBI), Mr Goyal said at the third National Accounting Convention of the Associated Chambers of Commerce and Industry of India (Assocham).

While a guidance note at best is recommendatory for the members of the Institute, an AS is akin to a law that companies would be required to comply with.

The ICAI guidance note, if adopted, would require expensing of employee stock options, stock appreciation rights and the shares offered under the employee share purchase plans, on the basis of the fair value method, although it permits use of intrinsic fair value method with extensive fair value disclosures.

Mr Goyal also said that the Institute would soon come up with an AS on financial instruments. On the proposed accounting standard on agriculture, he hinted that the Institute would go slow on this matter since not much corporate activity is seen in the segment; besides it is largely unorganised.

Commenting on the trends in the accounting standards, the ICAI President said that the thrust of the standards is more on transparency. "Earlier, AS provided alternatives. However, in tune with the need for standardisation and comparability, these alternatives should be eliminated. This is what we have done in the revised AS 2 (valuation of inventories) and AS 7 (construction contracts) wherein alternatives not close to best practices have been eliminated," he said.

Mr Goyal also urged the Ministry of Company Affairs to factor in the concept of `Group reporting and Group health' in the provisions of company law. He held that the concept of group and group net-worth would be of use to an investor. The Companies Act in the present form does not address the group concept adequately, he said.

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