'Cos must recognize impact of labour codes in Dec qtr P&L statements'

Companies must recognize the impact of the new labour codes in their December-quarter profit and loss statements, even as a new financial reporting format and lower compliance requirements for unlisted subsidiaries are in the pipeline, as per the head of the accounting profession’s self-regulator.

- Gireesh Chandra Prasad

Businesses are required to reflect any additional gratuity liability arising from the labour codes upfront in their December-quarter results, Charanjot Singh Nanda, president of the Institute of Chartered Accountants of India (ICAI), said in an interview, citing a guidance note issued by the accounting rule-maker.

The labour codes mandate that at least 50% of an employee's total remuneration be treated as wages, the basis for gratuity calculation. This may raise gratuity and leave benefit liabilities for many employers who currently compute gratuity on a smaller base because of allowances accounting for a larger share.