ACCOUNTING FOR DERIVATIVES

It may be noted that although the ICAI has issued AS 30, Financial Instruments : Recognition and Measurement, which contains accounting for derivatives, it becomes recommendatory from 1st April 2009 and mandatory from 1st April 2011. In this scenario, the Council expressed the view that since the aforesaid Standard contains appropriate accounting for derivatives, the same can be followed by the entities, as the earlier adoption of a standard is always encouraged. In case an entity does not follow AS 30, keeping in view the principle of prudence as enunciated in AS 1, Disclosure of Accounting Policies, the entity is required to provide for losses in respect of all outstanding derivative contracts at the balance sheet date by marking them to market.