In a move towards IFRS, tax accounting standard on cards
July, 31st 2014
As part of an integrated exercise for introduction of a new Indian Accounting Standard (Ind AS), the Government has initiated moves to put in place a Tax Accounting Standard (TAS) too.
The simultaneous exercises, experts told BusinessLine, will avoid confusion in determining taxable corporate income in financial reporting as well as complete the twin process within the two-year timeframe. The absence of a TAS had caused postponement of introduction of Ind AS in 2011.
The country restarted the preparation for the convergence towards International Financial Reporting Standards (IFRS) through Ind AS by 2016-17 after the Finance Minister announced it in his Budget speech. The process of standard setting gathered momentum recently, K Raghu, President of the Institute of Chartered Accountants of India (ICAI) said.
“In August, ICAI will meet the Central Board of Direct Taxes to deliberate on the proposed TAS,” he said. The TAS was aimed at making the Ind AS tax neutral and it would help remove the reservations of the companies on this score, ICAI President explained.
Raghu said ICAI would also submit its suggestion on the roadmap for implementation of new accounting standard in August. The revised recommendations on accounting standards would, however, be submitted by ICAI later.
According to Rahul Chattopadhyay, Partner of the audit firm Price Waterhouse, quite a bit of work has already been done. “This would help completing the exercises,” he added. Sai Venkateshwaran, Partner and Head of Accounting Advisory Services, KPMG in India, TAS would address the biggest concern for the corporate taxpayers and provide relative stability in tax treatments.
The Ministry of Corporate Affairs, which is spearheading the move to involve the stakeholders, also needs to take actions in institution building, such as the National Financial Reporting Authority (NFRA) and Registrar for valuers. Though the Companies Act 2013 paved the way for creation of NFRA, the Government is yet to notify formation of the regulator.
Venkateshwaran said till NFRA is put in place, the National Advisory Committee on Accounting Standards (formed under the Companies Act, 1956) will be allowed to continue work on the new accounting standards.