RBI MODIFIED NBFC ACCOUNTING NORMS

The Reserve Bank of India (RBI) has modified the accounting norms for non-banking finance companies. NBFCs were earlier advised in July 2008 that in terms of Accounting Standard 22, the tax effects of timing differences are included in the tax expense in the statement of profit and loss as deferred tax assets (DTA) (subject to the consideration of prudence) or as deferred tax liabilities (DTL) in the balance sheet. Further that the balance in DTL account will not be eligible for inclusion in Tier I or Tier II capital for capital adequacy purpose and that DTA being an intangible asset, should
be deducted from Tier I capital. However RBI has further clarified that DTL created by debit to opening balance of revenue reserves or to profit and loss account for the current year should be included under ‘others’ of “Other Liabilities and Provisions.”