Hindustan Construction Company, the infrastructure company building various large projects in Maharashtra and elsewhere, has changed its accounting treatment of Foreign Exchange losses which has reflected in a higher third quarter net profit figure, than what would have been, had set standards been followed.

The Accounting Standard 11 which calls for quarter-on-quarter mark-to-market adjustment in the event of any forex losses, would have resulted in a lower third quarter net profit by about Rs 24.57 crore and lower nine-month net profit by Rs 63.52 crore for HCC. While announcing its quarterly results last month, HCC had reported that its net profit for the third quarter ended December 2008, was Rs 23 crore, which was 7.4% lower than the profit posted last year.

According to HCC group CFO Praveen Sood, the company had sought legal opinion for the change and this is in line with the provisions of Schedule VI of the Companies Act. This change in the forex treatment is also mentioned by the (company's) auditors in their limited review report. Companies adopt such kind of practice when faced with the prospect of losses due to extreme fluctuations in foreign exchange, and if it is not core to the company's operations.

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