The Hindu Business Line : Centre to accept accounting panel's recommendations

AFTER much dithering, the Centre is set to accept and notify the recommendations of the National Advisory Committee on Accounting Standards (NACAS), which had suggested the accounting standards (AS) that corporates are required to adopt under the Companies Act.

So far, NACAS has considered and recommended AS 1-28 of the Institute of Chartered Accountants of India (ICAI) for notification as `accounting standards' under the Companies Act. Official sources said that the `accounting standards' that companies have to comply with is ready and would be notified in the third week of January.

Indications are that the Ministry of Company Affairs will notify AS 1-27 (except AS 8 and revised AS 11) of the ICAI as `accounting standards' for Companies Act purposes. While AS 8 deals with accounting for research and development, AS 11 deals with the impact of changes in foreign exchange rates.

Currently, the Companies Act stipulates that India Inc would have to adopt the accounting standards formulated by the ICAI. This dispensation would prevail until the Centre notifies the accounting standards recommended by NACAS. For recommending accounting standards to the Centre, the NACAS had taken ICAI standards as the base and suggested certain modifications.

When contacted by Business Line, ICAI officials said that there is no difference between the NACAS recommended standards and the standards prescribed by the Institute. "From time to time, wherever NACAS had recommended modifications on ICAI accounting standard to the Centre, the Institute has on its own undertaken limited revisions to its accounting standards. In effect there is no material difference between the two," an ICAI official said.

One of the reasons as to why the Centre delayed notification of the accounting standards is the applicability of accounting standards on small and medium sized companies. Since the accounting standards deal with complex issues and require, in many cases, detailed disclosure requirements for small and medium sized companies, it may become too difficult for such companies to make detailed disclosures keeping in view the expertise available with them and the cost involved, which may be more than the commensurate benefits, sources said.

NACAS was constituted to advise the Centre on the formulation and laying down of accounting policies and standards for adoption by companies or a class of companies under the Companies Act.