Implementation of Indian Accounting Standards (IND-AS) For NBFC & ARC

RBI circular issued in March 2020 provided that net unrealised gains arising on fair valuation of financial instruments, should not be included in owned funds whereas all such net losses should be considered.

It has now been decided that unrealised gain/loss on a derivative transaction undertaken for hedging may be offset against the unrealised loss/gain recognized in the capital (either through Profit or Loss or through Other Comprehensive Income) on the corresponding underlying hedged instrument.

If after such offset and netting with unrealised gains/losses on other financial instruments, there are still net unrealised gains, the same should be excluded from regulatory capital as required by the above- mentioned circular issued in March 2020.

It is also clarified that unrealized gains/losses shall be considered net of the effect of taxation.