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K.R. Srivats

New Delhi, July 23 With only 600 days to go before listed and other public interest entities start preparing their first financial information under International Financial Reporting Standards (IFRS), accounting and other advisory firms, especially the foreign ones based here, are gearing up to make the most of the opportunity in helping companies switch over to the widely used financial reporting standard.

But a lot would depend on the Government and regulators making necessary changes in law and regulations to facilitate the adoption of IFRS. Over 100 countries are requiring or permitting the use of these standards.

“Yes, there is lot of opportunity for us in IFRS. But the Indian Government has to quickly bring changes in the Companies Act. The law should refrain from specifying the accounting treatment and leave it to IFRS. There is also no clarity on how the tax department would respond to fair value accounting,” said Mr Sai Venkateshwaran, Partner, Grant Thornton India, told Business Line.

At a panel discussion on IFRS, organised by Grant Thornton India, Mr Ramesh Sanka, Group CFO, DLF Ltd, said that corporates would need to ensure preparedness for IFRS reporting as early as April 1, 2010 even though adoption was from April 1, 2011.

“Please do not assume that the goal post is three years ahead (April 1, 2011). It is two years ahead,” he said. The first set of IFRS financial statements for the year ended March 31, 2012 would require preparation of opening balance sheet as on April 1, 2010.

The Institute of Chartered Accountants of India (ICAI) has already announced intent to adopt IFRS from April 1, 2011. It would apply to all public interest entities from the accounting periods after April 1, 2011. The public interest entities include listed companies, banks, insurance companies, enterprises with turnover in excess of Rs 100 crore and all enterprises with borrowings in excess of Rs 25 crore.

Mr Sanka felt that adoption of IFRS is going to be a “painful process” for corporates.

Stressing the need for changes in company law, he pointed out that Schedule VI of the Companies Act currently treated redeemable preference shares as equity. But IFRS and also ICAI’s Accounting Standard (AS-30) considers preference shares as debt instrument. It was also pointed that regulators may also have to change regulations to facilitate IFRS adoption.

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