Audit & Assurance

No accounting relief on short-term forex loan losses

India Inc may not get accounting relief on forex losses, despite the significant downslide of the rupee. Corporate India has been pitching for accounting rule relaxation on losses arising on short-term foreign currency loans similar to what is available for long-term foreign currency debt. But the country’s top accounting standards body — the National Advisory Committee on Accounting Standards (NACAS) — has decided against any relaxation to the accounting rule that requires companies to adjust their loan exposure to the rates prevailing at the end of every quarter. India Inc claims that if an accounting relief were to be given, a less distorted picture of the balance-sheet would be available for investors. In the absence of any relief, forex losses from short-term loans would have to be taken to the profit and loss account. The accounting rule relaxation that was allowed for long-term foreign currency debt in December last year was dubbed as a New-Year gift to India Inc. The Corporate Affairs Ministry had then issued two notifications to provide relief for corporates that had sizeable long-term foreign currency loan exposure in their balance-sheets.