Foreign Exchange Derivative Losses : How Big ?

With rumours and some disclosure about foreign exchange derivative losses forthcoming, one wonders

1) How big is this hole ?

2) How badly it will affect the companies involved ?

3) How badly it will affect the economy ?

4) Will it trip the India Growth Story ?

ICAI asks companies to disclose derivative losses

http://business-standard.com/common/storypage_c.php?leftnm=10&autono=318382

Disclosures expected to total Rs 20,000 crore. 

The full dimensions of the foreign exchange derivatives crisis sweeping across corporate India will be known in a matter of weeks. In a dramatic decision announced late on Saturday, the Institute of Chartered Accountants of India (ICAI) has asked all companies to follow with immediate effect a new accounting norm that forces companies to disclose and/or provide for all losses on derivative contracts. 

While no firm estimates are available for the extent of such losses, foreign exchange consultants have estimated that the losses could total as much as $5 billion, or about Rs 20,000 crore. 

If up to 500 companies have to provide for losses on such a scale, it will severely dent the profits that they report for the financial year ending March 31, 2008 (i.e. Monday).