India can attract more foreign inflows if it were to fully adopt the international financial reporting standards (IFRS), Hans Hoogervorst, Chairman of International Accounting Standards Board (IASB) has said.
"Full adoption of IFRS will greatly strengthen the appeal of Indian capital markets to foreign investors", Hoogervorst told BusinessLine here on Saturday.
He was in New Delhi to attend the IFRS Regional Policy Forum being held for the first time in India.
India is looking to converge with IFRS and not fully adopt this set of internationally recognised accounting standards.
But the international community of standard setters, many foreign companies are keen that India follows the same international accounting language as most countries.
Hoogervorst said that the potential benefit from full IFRS adoption is even bigger for India as the country is further away from lot of sources of capital.
"If India goes in for IFRS with some carve-outs, you will find it difficult to explain to foreign investors.
Its complicated to explain to investors that we have adopted IFRS except for say two carve-outs. It doesn’t work. This cannot be conveyed in financial statements", he said.
ATTRACTING FOREIGN CAPITAL
Hoogervorst said that India is likely to be running trade deficits for the next decade and its chosen economic model hinges on attracting foreign capital to cover the deficit.
"Attracting foreign capital is of the essence for your economy. For international credibility of your capital markets, you have to do the whole thing (full IFRS adoption)", he said.
India could also be at the forefront of global standard setting if it were to fully adopt IFRS, it was pointed out.
The case itself is very compelling, Hoogervorst said, adding that India doing it (full IFRS adoption) a bit late than other countries will not matter.
"It has been demonstrated around the world that adopting IFRS really helps. Successful emerging economies like Brazil and Korea have fully adopted IFRS. Even in Europe, results have borne out".
NO SHIFT IN STANCE
The CA Institute will for now stand by its decision to get Indian accounting standards converged with IFRS and not fully adopt the latter, said K Raghu, President of the Institute of Chartered Accountants of India.
"We feel India is different from other countries. We are a happening country. All our sectors are growing very fast. We have issues before we go for full adoption. After a thorough debate, we have taken a decision only to converge", he said.
But the CA Institute is open to adoption of IFRS and that it was not closed to this idea, he said.
Now that a new company law was in place, the time is right for India to have convergence with IFRS, Raghu added.
"We don’t want a big bang approach. So we will do it in phases. Banking and insurance will take time. We are ready to implement it".
The Centre is yet to notify the implementation date for Indian accounting standards (Ind AS) which are mostly patterned on the lines of IFRS.
"We can’t just look at foreign investments. We should look at all the people in the framework and ensure they are comfortable about IFRS. As an apex accounting regulator, we need to keep in mind the views of other stakeholders", Raghu said adding that there were multiple reasons for the delay on IFRS convergence.