Friday, May 16, 2008

ICAI to make accounting system more transparent

In a move that will bring about greater transparencies in the disclosures relating to financial instruments such as derivatives, the Institute Of Chartered Accountants Of India (ICAI) has come up with a even more detailed Accounting Standard – AS-32.

Last December, ICAI had come up with detailed accounting standards — AS-30 and AS-31 — in order to establish principles for measuring and recognising financial assets & liabilities and contracts to deal in non-financial assets.

ICAI president Ved Jain said, “AS-30 and AS-31 were only the measurement and recognition of the financial statements. Whereas, AS-32 is an accounting standard that would lead to a proper disclosure of the financial statements.”

The objective of AS-32 accounting standard, is to bind financial entities to provide disclosures in their financial statements so that users can evaluate the important information in the statements. It will help client assess the significance of financial instruments for the entity’s financial position and performance. Moreover, it would also help disclose the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

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