Cos asked to disclose derivative losses under MTM: ICAI

New Delhi, Mar 31 (UNI) The Institute of Chartered Accountants of India (ICAI) today urged the companies to disclose all losses on derivatives in their financial statement this quarter.

ICAI President Ved Jain told newspersons here that companies should disclose their mark to market (MTM) losses on all outstanding derivatives under the newly adopted accounting norm, AS 30, or under the Principles of Prudence.

Currently, Indian companies do not reveal their losses on account of derivatives.

The decision was taken by the ICAI Council at its meeting here on Saturday.

The norms for disclosure of losses in derivatives become mandatory from April 11, 2011. Till then it is recommendatory in nature.

This clarification by ICAI has been necessitated by the confusion regarding implementation of the AS 30.

Noting that exposure to foreign currency derivatives may translate into heavy losses due to fluctuations in the foreign exchange rates, ICAI said the corporates could provide for losses in all outstanding derivative contracts at the balance sheet date by marking them to market.

He said entities have an option to follow the principle of prudence in disclosure of exposure in derivatives that is in case of uncertainty do not disclose, which is the conservative system of accounting.

However, in the event of non-disclosure, stakeholders would be unaware of any losses suffered by the company.

"As regulator of the accounting profession, ICAI felt there should not be any confusion and best accounting standards should prevail," he added.

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