New accounting standard and the measurement of private corporate saving

This paper deals with the implications for the private corporate saving estimation of the fair value accounting (FVA) rules for financial instruments and derivatives. These rules emanate from AS 30 accounting standard that has been issued by the ICAI in line with the International Financial Reporting Standards (IFRS). As per the rules, financial instruments unless held-to-maturity (HTM) are required to be marked to market (MTM). The paper argues that saving estimation based on fair value reporting could be misleading and volatile measure of firms' earning performance and so of corporate saving. If saving is estimated on this basis, it violates the basic principle of matching revenues and costs of specific transactions in the same accounting period. In this context, the paper also looks into the treatment recommended by the System of National Accounts (SNA), 1993 in regard to such transactions.