| |
Accountants body contests definition of "derivative"
Abhinaba Das
Mumbai, Jan 20: Possibilities of a swift introduction of derivatives trading has received another jolt with the definition of derivative, put down in the Companies Act (Amendment) Bill, being contested as misleading.The Institute of Chartered Accountants of India (ICAI), the apex body of accounting professionals, has said the definition provided under clause 2(19) of the bill "does not bring out the true nature of a derivative." According to the Companies Bill, 1997, "derivative includes security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument, option, future or contract for differences or any other form of security." The apex body of accountants feels the definition fails to highlight the instrument's most important feature -- of it being linked to price changes in an underlying asset or index. In the light of the ongoing debate on share market index-linked derivatives, ICAI has sought crucial modifications in the definition. It has suggested derivatives should
instead be defined as: "derivative includes an instrument that provides the holder (or writer) with the right (or obligation) to receive (or pay) cash or another financial instrument in amounts determined by reference to price changes in an underlying asset(s) or index." Derivatives trading, set to be introduced in the current fiscal, is mired in another controversy as the Bombay Stock Exchange president MG Damani has expressed his differences with other members of the LC Gupta committee over constitution of the futures exchange. The committee is yet to submit its final report thwarting the possibility of ready introduction of derivatives trading. Damani is believed to be against the formation of separate exchanges for trading in derivatives, such as futures and options. He wants it to be constituted as a separate segment within the existing bourses. The tax treatment of income from derivatives trading has met with dissent from experts. They suggest that uniform tax guidelines be drafted on treatment of
profits or losses arising out of derivatives trading.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
|
 |
