The Government will soon be empowered to swiftly incorporate in the Companies Act any changes in accounting standards through the rules governing the Act. It will not have to go through the long process of amending the Act.
In this regard, for the first time, the new Companies Bill has proposed that accounting standards will be laid down in the Bill (that will soon be the new Companies Act) itself. Currently, accounting standards are only recognised and notified under the Act.
Empowering the Government (here, the Corporate Affairs Ministry) to prescribe the latest international accounting standards through executive orders, will be akin to the Union Finance Ministry administering the Income-Tax Act through rules, said Mr Kaushik Dutta, Partner, PricewaterhouseCoopers.Online GST Certification Course by TaxGuru & MSME- Click here to Join
The new powers of the Government will enable big companies to immediately adopt international best practices in accounting, said Mr Rahul Roy, Director, Ernst and Young.
The Government will also be able to prescribe additional disclosure norms in its accounting rules.
Besides, it will be easier to adopt the International Financial Reporting Standards (that will be effective from April 2011), as there will not be any need to amend the Companies Act, Mr Dutta said.There would be some advantages for small and medium enterprises. SMEs do not have huge financial and other resources to quickly adopt the international best practices in accounting.
The new provision will enable the Government to provide exemptions to SMEs in adhering to global accounting standards, Mr Roy said.
Significantly, the new Bill also proposes that auditors need to comply with auditing standards notified under the Bill.
“This will enable fast action against auditors guilty of violating the norms,” Mr Dutta said.