The government today said that Indian accounting standards will converge with International Financial Reporting Standards (IFRS) by 2011, even as issues like fair value and depreciation are being ironed out. “We are still working on fair value concepts and other issues like depreciation, but I can assure you that we will stick to the roadmap laid for the convergence of Indian standards with the IFRS,” Corporate Affairs Minister Salman Khurshid said on the sidelines of an Assocham seminar on International Financial Reporting Standards (IFRS) here.
Even though the government has announced that companies with a turnover of more than Rs 1,000 crore will converge by 2011, the industry and accountants still have differences on how to determine the “fair value” of assets and liabilities.
In accounting, fair value is used as an estimate of the market value of an asset or liability. While some accountants are of the view that the historical cost should be taken into account while entering the value of an asset, some believe the current value should be taken into account.
“Users are for the fair value concept, while accountants prefer the historical concept,” Deloitte Haskins & Sells Chairman N P Sarda said.
According to the roadmap laid out by the Corporate Affairs Ministry, companies listed on the BSE or NSE or whose shares or other securities are listed on a stock exchange outside India, besides listed and unlisted companies with a net worth of more than Rs 1,000 crore, are to converge with IFRS from April 1, 2011.
Companies having net worth of exceeding Rs 500 crore will join the regime from April 1, 2013, while all other listed companies with a net worth of less than Rs 500 crore will converge with IFRS by April 1, 2014.
While all insurance companies will convert their opening balance sheets with IFRS from April, 2012, scheduled commercial banks and urban cooperative banks with a net worth of over Rs 300 crore will adopt it from April 1, 2013.
In addition, non-banking finance companies (NBFCs) which are part of the NSE or BSE or have a net worth of over Rs 1,000 crore will converge their opening books of accounts with IFRS norms from April 1, 2013. All listed and unlisted NBFCs with a net worth of over Rs 500 crore will convert their opening balance sheet from April 1, 2014.
According to the ministry’s roadmap, urban cooperative banks with a net worth of less than Rs 200 crore, unlisted NBFCs with a net worth of under Rs 500 crore and regional rural banks need not follow the converged accounting norms.
Commercial banks with a net worth of over Rs 300 crore and those UCBs with a net worth between Rs 200-300 crore will be required to convert their balance sheets to the new norms from April 1, 2014, onwards.