'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

Charanjot Singh Nanda, president of the Institute of Chartered Accountants of India.

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.