The adoption of International Financial Reporting Systems (IFRS), the globally accepted accounting practice, is no longer a matter of choice but a compulsion. However, this comes with a host of challenges, according to Mr P.R. Ramesh, Partner, Deloitte Haskins and Sells. Global practices

These include adapting to the global practices, possibly bringing about new guidelines to suit it, educating auditors on these practices and also amending the Companies Act and ensuring that the Income-Tax Act recognises these changes, Mr Ramesh, who is also part of the Convergence group driving these changes.

However, what is interesting is that many multinational companies are already leveraging the Indian advantage for their accounting practices and this could only get bigger. In fact, if we play our cards right, India could also serve as a hub for global corporations, Mr Ramesh said. Large MNCs such as Microsoft have part of their auditing operations handled out of India and many are likely to follow suit, he said.

Already about 108 countries have adopted IRFS and many countries, particularly in the European Union and the US want overseas corporations, which list in their shores, to have their balance sheets certified by local auditing firms.

Standards

India has exercised its intent to move to this by April 1, 2011. There are about 38 different elements within IRFS, which need to be followed and this list continues to grow. However, in India we follow 29 of them but formats vary. This has to change, he said. Referring to areas such as financial instruments which include derivatives, accounting of agriculture income, share based payment (stock options) and business relations (mergers and acquisitions), Mr Ramesh said India has a long way to go in evolving standards that converge with global practices.This is where over 1,41,000 chartered accountants would need to re-skill to meet these requirements.