Companies may soon get some relief on the applicability of revised accounting standard on employee benefits (AS-15) - a key accounting code that also covered accounting treatment of retirement benefits.
Acting on representations from organisations such as State Bank of India, the Institute of Chartered Accountants of India on Tuesday said that it has approved the deferment of the applicability of this accounting code.
A number of blue-chip companies had also expressed reservations over the revised AS-15, stating that this code would affect their balance sheet strength. The transitional provisions were particularly a thorny issue for some organisations such as the SBI, as it required the additional liability to be adjusted against the reserves.
Date of applicability
"The revised AS-15 would now be applicable from accounting periods beginning on or after December 7, 2006. Industry had expressed its practical difficulties. Keeping in view the genuine hardships, we have agreed for the deferment. It was earlier applicable for the current fiscal itself (beginning April 1, 2006)," Mr Sunil Talati, the newly elected ICAI President, told newspersonshere on Tuesday.
Mr Talati, who is the first-ever ICAI president from Gujarat, said that this was decided at a meeting of the ICAI Central Council that ended on Monday. This was also the first meeting of the 20th Central Council, which now comprises 40 members.
He also said that the transitional provisions of revised AS-15 might be modified to provide an option to corporates to charge additional liability arising from the first application of the standard as an expense over a period up to five years.
The ICAI Vice-President, Mr Ved Jain, said that the unrecognised amount would however be required to be disclosed in the balance sheet. Informed sources said that the corporate benefit arising on this account would run into "hundreds of crores".
To refer to NACAS
Mr Talati, however, said that the entire matter (deferment and transitional provision relief) would now be taken up with the National Advisory Committee on Accounting Standards (NACAS) as the UnionGovernment has already notified the revised AS-15 under the Companies Act.
"Since the Government has already approved the revised AS-15, any change or deferment would require its nod. So companies will have to wait but ICAI Council has agreed it will help," sources said.
Many enterprises had voiced concerns over the transitional problems to the new standard, stating that this would result in higher provisions for retirement and other employee benefits
The revised AS-15 has stringent requirements concerning measurement of employee benefits costs.