The accounting regulator, Institute of Chartered Accountants of India (ICAI), has taken strong exception to the corporate sector’s demand for deferring the implementation of the International Financial Reporting Standards (IFRS). It feels that the accounting profession as well as the government are fully geared to make the transition in line with India’s commitment at the G-20.
“The industry was always kept in loop regarding the preparations for a phased roll out. Several companies have already invested heavily in converging the accounting norms with international standards,” Amarjit Chopra, President, ICAI, told The Indian Express. Leading industry body Ficci recently called for delaying the transition claiming lack of clarity in preparation of financial statements and the taxation regime when IFRS kicks in. Ministry sources too said the government was on course to implement the global reporting standards and apart from a few glitches, the process is largely on track.
The Ministry of Corporate Affairs has laid down a three-phase implementation programme for India Inc. In the first phase, all listed companies on the BSE and NSE and those with net worth higher than Rs 1,000 crore will be required to implement the IFRS accounting norms for the financial year beginning April 1, 2011.
Chopra said that the chambers were involved in the process of preparing the blueprint for the convergence of Indian accounting standards with the global standards. In fact, the core group set up by the ministry for preparing the roadmap comprised chief financial officers of several companies.
“I feel strongly against it because all chambers were involved in the process for the last two years. So many industrial houses have prepared themselves to effect the transition. And now, all of a sudden, there are these voices for delaying the entire process. But neither the government nor the chartered accountants foresee any problem in implementing,” Chopra said. The industry should not try to over ride the commitment made by the government in G-20 for converging the domestic accounting standards with the global reporting standards, he added.
Experts said companies fear a fall in their bottomlines as they were not sure how the IFRS regime would pan out. IFRS requires that all transactions and assets be accounted at fair value or marked to market. This may reduce the profits of several companies depending on the sectors they operate in. For instance, they said, real estate and banking may be hit hard by the new standards.
In its presentation, Ficci had said there were issues like lack of clarity over the taxation regime under IFRS and preparation of financial statements that were still to be addressed by the government. “We also need to bear in mind the fact that the new Companies Bill is pending finalisation, as is the Draft Tax Code. This would also impact the industry as it will have to grapple with so many issues simultaneously… Moreover, adoption of IFRS requires a lot of preparatory work for companies in terms of comprehending, training and modification of software and IT systems,” the industry body had said. Citing example of the US, which has categorically stated it will adopt IFRS only after 2015, Ficci said it would be unfair for the Indian companies to adopt the converged standards without full preparation.