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The CA Institute is not averse to banks adopting the newly notified accounting standard on financial instruments (Ind AS 109), its President Manoj Fadnis has said.
However, it is for the Reserve Bank of India (RBI) as regulator of banks to take a final call on its implementation date, Fadnis said.
Once implemented, the new accounting standard on ‘financial instruments’ could significantly alter the shape of banks’ earnings and balance sheets, say accountancy experts.
This is because India will then move from a rule based approach to a principle-based approach and this could have significant impact on aspects like provisioning for bad loans.
India will then in full spirit adopt an “expected loss model” for provisioning of bad loans as against “incurred loss” model.
The Corporate Affairs Ministry had few days back—as part of 39 new accounting standards-- notified the accounting standard on ‘financial instruments’ (Ind AS 109), surprising the entire corporate sector.
As per the IND AS roadmap announced by this Ministry, the AS 109 standard—which is fashioned on IFRS 9—gets mandatorily implemented for corporates with net worth of over ₹ 500 crore with effect from April 1, 2016.
However, this roadmap does not cover banks, insurance companies and Non-banking finance companies.
Accountancy experts reckon that India moving to converged IFRS –Ind AS—will only improve earnings and revenues of corporates.
CARVE OUTS
Fadnis said the CA Institute is keen to engage with the International Accounting Standards Board (IASB) on the issue of carve-outs maintained by India on IFRS convergence front.
“We will convince them or they (IASB) should convince us”, he said, adding that carve outs may not be here to stay for all times to come.
India is now having two mandatory carve outs as regards IFRS convergence—one on foreign currency convertible bond and the other on business acquisition.
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