CBDT-ICAI group : Convergence with IFRS — Addressing tax issues

The Central Board of Direct
Taxes (CBDT) and accounting rule-maker Institute of Chartered Accountants of
India (ICAI) have jointly constituted a study group to identify and address
direct tax issues that will affect convergence of India’s accounting standards
with International Financial Reporting Standards (IFRS).

According to reports, the
Finance Ministry is looking to introduce the DTC in the forthcoming budget
session. Apart from many aspects that are being discussed, one aspect that will
particularly come as a hurdle for IFRS convergence is towards tax treatment of
mark-to market (MTM) provisioning on derivative transactions. MTM or fair value
accounting assigns a value to a position held in a financial instrument based on
the current fair market price for the financial instrument.