The Hindu Business Line : ICAI clarifies on accounting standards of unlisted arms of foreign cos

THE Council of the Institute of Chartered Accountants of India (ICAI) has cleared its announcement - issued in November 2003 - on `Applicability of Accounting Standards to an unlisted Indian company which is a subsidiary of a foreign company listed outside India. The announcement was in the context of the scheme of applicability of accounting standards to small and medium-sized enterprises (SMEs). As per the said scheme, all accounting standards are applicable to Level 1 enterprises.

The institute, in a press note issued here on Wednesday, has clarified that the status of an Indian company under the scheme will be determined independent of its parent foreign company. The ICAI note further informs that besides the announcement, the Council has also cleared three new/revised Accounting Standards Interpretations (ASIs). According to the note, Level 1 enterprises, inter alia, include, whose equity or debt securities are listed either in India or outside India, and holding or a subsidiary of a Level 1 enterprise.

With regard to the scheme, an issue was raised as to whether an unlisted Indian company, which is a subsidiary of a foreign company incorporated and listed outside India, would become a Level 1 enterprise. The ICAI announcement clarifies that the Indian company will be considered as a Level 1 enterprise, if its parent foreign company, incorporated and listed outside India, is required to prepare financial statements as per Indian GAAPs. On the other hand, if the parent outfit is not required to prepare financial statements as per Indian GAAPs, its India subsidiary would not qualify as a Level 1 enterprise.

It is stated that the above ASIs would be available shortly on the Web site www.icai.org.

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