New accounting norms to hit banking, telecom firms most

About 350 companies having a net worth upwards of Rs 500 crore in the BSE 500 universe will adopt Indian Accounting Standards (Ind AS) from this financial year. Some of these companies were following the Indian Generally Accepted Accounting Principles till now. Ind AS is similar to International Financial Reporting Standards.  Commodity Market Astrology Tips

The norms will impact the net worth, return ratios and earnings of Indian companies. This is because it brings about a significant change in the accounting of mergers and acquisitions (M&As), revenue recognition, employee stock options (ESOPs), foreign currency transactions, treatment of redeemable preference shares as debt versus equity earlier, among others. Banking and telecom will see the highest impact of this transition. Cement and capital goods will be the least hit, estimate analysts at Motilal Oswal Securities.     Stock Market Trading Tips

“Migrating to Ind AS will require corporates to prepare an opening balance sheet on the transition day, recognising assets and liabilities in accordance with Ind AS and adjusting the difference on migration through reserves. This will imply material change in the net worth of companies,” says Sandeep Gupta, analyst at Motilal Oswal Securities.   Himanshu Tiwari Astrologer Blog
The new norms make it mandatory to account for ESOPs on a fair valuation basis. This could increase employee costs for most companies. Earlier, they had a choice between adopting either the intrinsic value or the fair value methods. Companies in banking/financials, information technology (IT), consumer goods and pharmaceuticals offer high ESOPs and are accounting for these on an intrinsic value basis. Hence, these will be hit the most by the new norm. Analysts estimate CRISIL, HDFC Bank and Info Edge will see a six to 11 per cent hit on earnings.

And, all financial instruments will have to be accounted for on a fair value basis. Every year mark-to-market (recalculating at current valuations) of gains will have to be accounted for in the profit & loss (P&L) account. All these changes will boost book profits and this will push up the Minimum Alternate Tax (MAT) payable by companies.   Financial Astrology