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NEW DELHI, Sept. 2

THE Chairman of the National Advisory Committee on Accounting Standards (NACAS), Mr Y.H. Malegam, has made a case for amending the Companies Act, 1956 to ensure that corporates do not take advantage of certain provisions to bypass the established accounting standards.

"A number of corporates are using the premium account on shares issued by them to provide for the large premium payable on redemption of debentures. They are doing this by resorting to Section 78. The debentures are being issued with huge redemption premiums, which are a surrogate for the interest payments," Mr Malegam said at a Joint Conference organised by the Institute of Chartered Accountants of India (ICAI) and the Institute of Chartered Accountants in England and Wales here on Monday.

Mr Malegam pointed out that companies are able to avoid a charge on the profit and loss account by applying the securities premium account for paying the premium on debentures.

He also called for a change in the Companies Act to make it mandatory on the courts to ensure that the restructuring schemes sanctioned by them are in conformity with the established accounting standards.

"The courts should ensure that the accounting provisions specified under the restructuring schemes under Section 391/392 or reduction of capital under Section 100 are in conformity with established Accounting Standards. The Act should be amended to ensure that the accounting treatments specified under the capital restructuring schemes sanctioned by the courts do not gain primacy over the established accounting standards," Mr Malegam said.

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