Chairman of an influential parliamentary committee has urged the prime minister to delay the rollout of global accounting norms by at least two years, saying India need to enter into a dialogue with other countries to modify the proposed norms to suit local practices. International financial reporting standards (IFRS), which seek to bring about a convergence in the way corporate accounts are prepared globally, is set to be rolled out from next fiscal year in a phased manner.
“India should engage in a dialogue with USA, Japan and China to get IASB (international accounting standards board – the global standard setter) to modify IFRS after taking into account the ground realities applicable to India and Indian companies,” said Murli Manohar Joshi , chairman of the public accounts committee, in a letter to prime minister Manmohan Singh .
“We should focus our attention on … the areas where Indian accounting standards differ with IFRS, so that by 2013 or by 2015, the stabilised IFRS can take into account the concerns of Indian accountants and Indian companies,” he said in the letter. Economies such as US and Japan which have already deferred IFRS implementation by 2015, Mr Joshi said.
The ministry of corporate affairs, which is the administrative ministry coordinating the convergence scheme, said the process is in schedule.
“We’ve not seen the contents of the letter. As of now we can only reaffirm our position that the convergence process in on schedule and all the regulatory formalities will be met with,” said a senior official with the ministry of corporate affairs.
Convergence to IFRS is part of India’s commitment at the G20, a global forum of the world’s largest economies. Convergence typically means that Indian companies will not be required to follow IFRS principles in totality, but they need to follow standards that are aligned to global norms. Many of the converged standards have suggested changes in norms relating to real estate and foreign exchange.
The government has charted out a three-phase IFRS convergence process for Indian companies with the first phase beginning in April 2011. In the first lot, all companies listed on the BSE and NSE and those with net worth higher than . 1,000 crore will be covered.
The convergence requires preparedness not just at the level of companies that follow it, but also from the government in respect of regulatory policies. Some of the regulations that are yet to be aligned for the convergence include taxation laws, existing Company law provisions.
Approximately 120 nations have accepted IFRS for domestic listed companies. Of these, about 90 countries have made it mandatory for their companies to follow IFRS.
Currently, India does no require its companies to follow the IFRS. However, as per its commitment to the G20, India will converge its domestic accounting standards with IFRS in a phased manner from April 1, 2011.