Although the Financial Accounting Standards Board (FASB) has been in existence for decades now, audit reports issued in the US now mention about the standards prescribed by the PCAOB. The PCAOB by itself has issued only four AS, but these are in concurrence with the standards issued by the FASB. Although the ICAI (Institute of Chartered Accountants of India) is still a body of the government, it can certainly be given powers to issue AS akin to the FASB. The Reserve Bank of India was proactive enough to initiate a dialogue with the ICAI and inform it that a few of its AS could not be complied with by banks.

Both the bodies then came out with clarificatory standards for banks. Another fact that cannot be ignored is that NACAS (National Committee on Accounting Standards) would probably be useful only for corporates, as the only mention of it as of now is in the Companies Act. The phenomenon now is to prescribe AS for entities, which would include companies, partnership firms and even individuals which meet prescribed criteria.

Over the years, globally and in India, AS only prescribed broad guidelines for accounting and disclosure. However, when practically implied, the devil seemed to be in the details. What has assumed more importance of late is not the broad guidelines themselves but the interpretation of AS under specific circumstances.

The International Financial Reporting Standards (IFRS) -- the only claimant for global accounting standards -- has been issuing a number of interpretations on topics as eclectic as accounting for free mileage points given by airlines and valuing stock options.

Even in India, the ICAI has been issuing interpretations of AS which have helped corporates. This is a job that NACAS may not do.

The ICAI needs to convince the Government to give it unilateral powers to prescribe AS for all entities. The ICAI is also best placed to ensure compliance given its unofficial status as the accounting regulator in India and its experience in performing this function.