India Inc reviews IFRS for fool-proof accouting standards
May, 05th 2009
India Inc appears keen to respond to the Institute of Chartered Accountants of Indias (ICAI) call to implement globally accepted International Financial Reporting Standards (IFRS) from fiscal 2011-12. But a majority are unsure on whether IFRS implementation would really bring about uniformity in the accounting system, which is now beset with divergent interpretations by multiple authorities including Sebi and tax officials.
An indication along these lines comes through in an Ernst & Young study that has mapped India Incs preparedness in implementing the IFRS, whose rudimentary rules are laid down by the global body International Accounting Standard Board (IASB). The conclusions of the survey were shared by a senior E&Y official Kamal Agarwal, while participating in a discussion on IFRS organised by Bharat Chamber of Commerce on Monday.
The survey while receiving responses from some 112-odd companies, selected from across a wide range of industries, has noted that 67% of the respondents welcomed the implementation of IFRS as a major step towards Indias integration with the global financial system. But a large section of the surveyed companies feared they would be unable to meet the deadline for the IFRS implementation due to its prohibitive cost, dearth of required skilled manpower and uncertainty on the new set of tax laws under the system.
The uncertainty deepens further with no clarity on whether India would follow the IASB- laid down norms or come out with a modified country-specific version, which have been evolved by few countries like Australia, Singapore and Japan and the EU block, said Mr Agarwal.
With increasing globalisation, corporates across the globe are adopting reporting of the financial statements based on common accounting standards, enunciated under IFRS. It is now being followed in many parts of the world, including the European Union, Hong Kong, Australia, Russia, South Africa and Singapore. Nearly 100 countries agreed on the convergence with IFRS.
In line with the global trend, ICAI has proposed a plan for convergence with IFRS for certain entities (listed companies, banks, insurance companies and certain other large-sized companies) with effect from the accounting period, commencing on or after April 1, 2011. Large-sized entities are defined as entities with turnover in excess of Rs 100 crore or borrowing in excess of Rs 25 crore.