Banks and companies will not be able to hide losses even if they are marked to market.
The Institute of Chartered Accountants of India (ICAI) on Friday approved Accounting Standard 32 for disclosure of losses and gains from investment in various market-linked instruments such as derivatives, mutual funds, government securities.
Though the new norms are mandatory only from 2011, companies are free to start using AS 32, as it is called, from 2009, the ICAI said.
The expectations are that the stringent standard will bring about transparency especially with the way derivatives losses are shown in the financial statements.
The new norms will enable users to "evaluate the significance of financial instruments for the entity's financial position and performance; and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and how the entity manages those risks," the ICAI said.
Derivatives losses arisen out of mis-selling of some products by banks have been in the news for the last few months.
Investors have not yet known the extent of the losses since these loses are 'marked to market' and disclosures are not compulsory.
ICAI said its officials are increasing vigilance on company books to provide correct disclosures.