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Wednesday, Jul 17, 2002

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Attention, standard ease

WELL, by now this has become the talking point for accountants: That banks have been exempt from mandatory compliance with four Accounting Standards (AS) issued by the Institute of Chartered Accountants of India.

The sop came from Reserve Bank of India (RBI) after considering the difficulties expressed by banks in complying with the requirements of the new AS. However, compliance with these standards is optional only for the financial year ended March 31, 2002.

The four standards in question were: AS-17 on Segment Reporting, AS-18 on Related Party Disclosure, AS-21 on Consolidated Financial Statements, and AS-22 on Taxes on Income.

To be in line with the RBI decision, SEBI has issued a circular advising stock exchanges that compliance with its earlier circular No. SMDRP/Policy/Cir-44/2001 dated August 31, 2001 - which made it mandatory for listed companies to comply with all AS issued by the ICAI - would stand suitably modified vis--vis the banks. They would, however, be required to conform to the above four standards for the years commencing on or after April 1, 2002. (Circular No SMD/Policy/Cir-16 /2002 dated June 25)

FDI full

The Ministry of Commerce and Industry has issued a press note revising the existing sectoral guidelines for foreign direct investment (FDI), including investment by non-resident Indians and overseas corporate bodies. What was in vogue was Press Note 2 (2000 series) dated the February 11, 2000 laying the sector specific guidelines for FDI, with regard to advertising and film sectors as follows.

Accordingly, automatic approval was available for up to 74 per cent FDI in advertising and 100 per cent in film industry (that is, film financing, production, distribution, exhibition, marketing and associated activities relating to film industry).

Conditions, however, were that companies had to have an established track record in films, TV, music, finance, and insurance; that the company should have a minimum paid-up capital of $10 million if it is the single largest equity shareholder and at least $5 million in other cases; that the minimum level of foreign equity investment would be $2.5 million for the single largest equity shareholder and $1 million in other cases; that debt equity ratio of not more than 1:1 (that is, domestic borrowings shall not exceed equity); and that provisions of dividend balancing would apply. The new relaxation is to permit FDI up to 100 per cent on the automatic route in the advertising sector. Also, the FDI in the film sector, which is already on the automatic route, will not be subject to the conditions indicated at I to V above. (Press Note No 4/2002 dated July 4, 2002)

What RBI SEZ

The RBI has made amendments to Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, by inserting a new Rule 6A which is about "Foreign Currency Account (FCA) of a Unit in a Special Economic Zone (SEZ)".

According to this: A unit located in a SEZ can open hold and maintain an FCA with an authorised dealer in India. Conditions are: that all foreign exchange funds received by the unit in the SEZ are credited to such account; no foreign exchange purchased in India against rupees shall be credited to the account without prior permission from the RBI; and the funds held in the account shall be used for bona fide trade transactions of the unit in the SEZ with the person resident in India or otherwise.

Also, the funds held in these accounts should not be lent or made available in any manner to any person or entity resident in India not being a unit in SEZ. (Notification No GSR 465(E) dated June 21, 2002)

Abracadabra

If you didn't know, there is a law that governs magic remedies, and it was recently amended.

Called the Drugs and Magic Remedies (Objectionable Advertisements) Amendment Rules, 2002, it has a new Schedule (with reference to Rule 6) and it has two entries: Asthma and AIDS. (Ministry of Health and Family Welfare Notification No GSR 447(E) dated June 25, 2002)

D.M.

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