Rupee appreciation may have hit technology companies hard. But for others it has brought forex gains. Reliance Industries' first quarter net profit of Rs 3200 crore could have been even higher by a whopping 12%. That is if they had accounted for forex gains like some of its peers like Jet Airways and Tata Motors. But instead Reliance Industries preferred to adjust the Rs 383 crore of foreign exchange gains against the fixed assets in the balance sheet. On the other hand, Jet, Tata Motors, Essar Shipping and dozens of companies have taken hundreds of crores of forex gains to the profit and loss account.

And it is a December notification of the companies affairs ministry that is causing this accounting confusion. The notification requires companies to charge all gains accruing to it on account of, forex loans taken for purchase of fixed asset, to the P&L. But the Schedule 6 of Companies Act says something exactly opposite.. Schedule 6 allows corporates to capitalise or credit the the forex gains to the fixed asset account.

PR Ramesh Partner, Deloitte Haskins & Sells says, "Two sub sections within the same section 211 of companies act are contradicting each other. So, which one over rides the other? Therefore two views are possible."

Thats only the begining of the forex confusion..as there are also different opinions on the applicability date of the December notification. While some accountants believe the notification applies to all forex loans after April 2004, others say only loans taken after April 2007 will fall under the new accounting guidelines.

Dolphy D'Souza Partner, E&Y says that there is one date in original AS - 11, another date in the December notification.. so there is confusion.. as it is not clear whether the cut off date is 1st April 2004 or 1st april 2007.

And even a clarification from the regulator of the accounting profession may not solve the issue. The controversy is based on interpretation of sections of the companies act. So, some accountants argues that companies could disregard the ICAI 's opinion, based on legal advice. Well, that means it is free for all atleast as far as accounting for forex gains is concerned