ICAI told to help CPSEs embrace global accounting norms
January, 27th 2009
The government has asked the Institute of Chartered Accountants of India (ICAI) to prepare a roadmap for public sector companies to meet international accounting norms that would make their financial statements easily comparable with that of companies in more than 150 nations.
International financial reporting standards (IFRS) would allow public sector companies to classify financial instruments based on their substance than their form, bringing more credibility and transparency into their books. IFRS would also give the companies holding massive real estate assets to show their market value in their books, as against the current practice of showing the purchase price (the historical cost) after allowing depreciation. Historical cost is good for record keeping but not useful for decision making. Adopting IFRS would also facilitate easy access to international capital markets.
Accounting regulator ICAI has been asked by the ministry of heavy industries and public enterprises to look into the present accounting format of central public sector enterprises (CPSEs) and bring them in line with IFRS principles, an official in the ICAI said on conditions of anonymity.
With the IFRS convergence deadline of April 2011 not being far, the move reflects a sense of urgency within the government to bring its public entities within the ambit of a globally compliant accounting framework, the official said.
Experts point out that the move towards convergence with IFRS shall bring with it multiple benefits, apart from lending to their balance sheets a credibility in the eyes of the global community. According to Jamil Khatri, head of accounting advisory services at audit consultancy firm KPMG, the move to make PSUs adopt IFRS will require extensive computerisation of their financial data, which in many cases are manually maintained.
Mr Khatri says the initiative will usher in greater transparency in the numbers of public sector companies. The government is gearing up for a timely transition with the globally recognised norms, the ICAI official said.