The government has deferred the implementation of international financial reporting standards , acknowledging industry demand to extend the April 1 deadline to remove ambiguities on taxation issues. The decision has come as a relief for over 300 large companies, which were to submit their financials as per the global accounting standards, commonly called IFRS.
The ministry of corporate affairs on Friday said it remained committed to the transition as it notified 35 accounting standards that are in line with IFRS. After detailed consultations, it was felt necessary that industry should be given some more time to prepare themselves to converge their accounts, said a corporate affairs ministry official. A ministry release said the convergence will happen in a phased manner after various tax-related issues are resolved.
Finance Minister Pranab Mukherjee is likely to provide clarity on the taxation aspect in his budget speech. The date of implementation of converged Indian accounting standards will be notified at a later date, said the release. Sections of the industry had criticised the April 1 dateline for reasons including a lack of preparedness and confusion over taxation matters. Industrys concerns were discussed in detail recently when corporate affairs minister Murli Deora met representatives of business chambers to understand their concerns.
Accounting experts welcomed the move. The fact that the standards are being notified is a step in the right direction. It gives certainty to the convergence and shows our commitment on the same, said Jamil Khatri, partner at consulting firm KPMG.
Prime minister Manmohan Singh had made a commitment towards the alignment of Indian accounting standards with IFRS at the G20 summit in 2009. Thereafter, the ministry of corporate affairs came up with a road map for the convergence, wherein companies part of BSE Sensex and NSE Nifty, those listed on overseas stock exchanges, apart from companies with a networth of above Rs 1,000 crore were to converge with IFRS from April 1, 2011. Since November last year, there has been a demands from the industry and certain regulators that India should not rush into the convergence .
Chairman of the public accounts committee of Parliament Murli Manohar Joshi in November 2010 urged the prime minister to delay the rollout by at least two years, saying the country needs to enter into a dialogue with other countries to modify the proposed norms to suit local practices. Thereafter, the PM had advised the corporate affairs ministry to hold a fresh round of discussions with companies that were to follow the IFRS standards from April. Concerns got even larger when industry body FICCI asked the ministry to defer the April 1 deadline, citing lack of clarity on tax issues.
Although the government has deferred the rollout date, it will go ahead with the notification of the new set of accounting standards. While remaining committed to the IFRS convergence scheme, we want to make sure that approach is kept sound and full proof, said another government official, requesting anonymity. Corporate affairs ministry is set to introduce the new Companies Bill the current Parliament session, the passage of which is critical to the smooth convergence with IFRS.