The convergence of Indian accounting practices with the International Financial Reporting Standards, set to begin in the next financial year, will give a boost to FDI inflows to the country, says K. Raghu, president of the Institute of Chartered Accountants of India.
The adoption of Indian Accounting Standards (IndAS), which is in sync with the IFRS, would help globalization of the economy, apart from opening up the floodgates of overseas opportunities for young chartered accountants, Raghu told Business Line. “It will increase foreign investments and step up international trade, thus helping in globalisation.” Foreign investors would be better equipped to hold shares in Indian firms as they could quickly assess the financial health of these companies.
IFRS, a common global accounting system for companies, has been adopted by over 100 countries, Raghu noted. “Its adoption by India will make our companies’ accounts easily understandable and comparable with those in other countries.” There would be common rules of accounting in the IFRS countries.
Raghu said the IndAS regime would come into force from 2016-17, but for one year prior to that, it would be used on a non-mandatory basis. The ICAI was facilitating this change-over. IndAS would bring in major changes in financial reporting. One important change would be in the determination of the fair value of companies’ assets and liabilities. Fair value would be determined on the basis of current market value.
Ache din for CAs
Raghu said convergence with IFRS would help Indian chartered accountants to find lucrative jobs abroad. Already, Indian accountants were in high demand in many countries. In the UAE alone, some 10,000 were practicing. In the globalised accounting scenario, the demand would grow.
He said that under the Companies Act 2013 regime, the scope of operation and responsibilities of the accountants had increased.
Section 149 of the Act made it mandatory that one- third of the members of companies’ board of directors be independent directors. This was a great opportunity for chartered accountants. The ICAI, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India had together set up an Independent Directors Repository under Section 150 of the Companies Act. “These professionals are better equipped to become independent directors than others,” he said. “They can add value to the companies because of their experience with things financial.” Anybody with the stipulated qualifications could sign up on the repository, though.
The Act asks auditors to report financial fraud in the companies to the government, putting extra responsibilities on the CAs, he noted. Asked if the chartered accountants auditing banks’ accounts had failed in reporting the unusual bad loans amassed by many Indian banks, Raghu said this was not so. However, the ICAI had taken disciplinary actions against some erring accountants.
He said the ICAI had offered its support to the Narendra Modi Governments’ three major programmes—Jan Dhan, Swatch Bharat and Make-in-India. But, asked this meant the chartered accountants’ body was going `political’ and supporting the BJP, Raghu claimed it was only helping in nation-building.