Acc. ICAI, RBI may accept global accounting practice IFRS
October, 25th 2010
Accounting regulator ICAI today said that the Reserve Bank of India (RBI) may accept global accounting practice IFRS but will not give up prudential norms completely as they saved Indian banks from global financial meltdown.
Prudential norms imply regulations framed by RBI to avoid defaults by banks. These norms include maintaining minimum capital adequacy ratio of 9 per cent, keeping a portion of deposits with RBI in cash and other sectoral regulations.
The RBI may accept the International Financial Reporting Standards9 (IFRS9) but may not be giving up the prudential norms in totality. Prudential norms saved Indian banks. They are ruled based. The RBI may contemplate a change but not completely, Ins titute of Chartered Accountants of India (ICAI) President, Mr Amarjit Chopra said.
IFRS9 divides all financial assets that are currently in the scope of International Accounting Standards39 (IAS 39) into two classifications those measured at amortised cost and those measured at fair value.
Classification is made at the time the fina ncial asset is initially recognised, namely when the entity becomes a party to the contractual provisions of the instrument.
Relaxed norms for investment banks in the US and Europe had led to global financial meltdown while Indian banks were saved from the crisis due to tight regulations by the RBI.
According to the roadmap laid out by the Corporate Affairs Ministry, large companies will have to prepare their account books as per the IFRS by April 2011, while scheduled commercial banks and urban cooperative banks will adopt it from April 1, 2013.
All insurance companies will convert their opening balance sheets with IFRS from April, 2012, while 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 a ccounts with IFRS norms from April 1, 2013.