Corporate India is not yet ready to meet the April 1, 2013 deadline for the adoption of the Indian version of International Financial Reporting Standards (IFRS) popularly known as Ind AS. There are several parts of the International Standards that India Inc is not willing to accept.
Some companies are already providing financial information prepared in accordance with accounting principles generally accepted in the US (US GAAP) and IFRS. But for some companies it is more of a necessity than a best practice, say tax experts.
Several Indian companies are listed in the foreign markets. Some also have large international operations and significant stakeholders in other markets.
Companies like Dr Reddy’s Laboratories, Infosys and Wipro are dual listed, while others like Glenmark Pharmaceuticals and Bharti are driven by global operations. Bharti has been coming out with IFRS financial statements for some time now and the same is reported to SEBI.
Some like Chennai-headquartered Murugappa Group, automaker Mahindra & Mahindra and textile major Bombay Dyeing were ready with the accounting standards three years ago. Yet, there is also resistance by a sizable some section of India Inc to adopting the standards.
“Almost 70 per cent of the companies believe it is illogical and not good for the corporate sector. Many companies are not inclined because many of the provisions are stringent in India. The cost of borrowing will come down, profits will come down,” said Jamil Khatri, Global Head of Accounting Advisory Services practice at KPMG.
“Indian companies are no longer answerable to a closed group of stakeholders. The opposition to IFRS is strong. There is no clarity on how this impacts taxation. The moment we move into IFRS there are a lot of adjustments, both positive and negative,” added Sai Venkateshwaran, Partner and Practice Leader, Financial Reporting Advisory Services, Grant Thornton India.
“Engineering and consumer goods companies and even those in the financial sector are not inclined to move to the new standards. There is no motivation, no incentive. The Government has not given clear directives to the corporate sector,” said Khatri.
Sunder Iyer, Partner at PwC, said, “The IFRS landscape itself is evolving. The focus internationally has always been on consolidated statements. In the Indian context, standalone financial statements are considered. There are a bunch of issues like direct taxes, indirect taxes on which we do not have clarity. India Inc needs to have an introductory period to build consensus.”
Though Minister for Corporate Affairs Veerappa Moily said that India is set to implement the internationally accepted rules from April 1 next year, Khatri said Moily’s statement is not based on reality.
“There is a big disconnect in what the Ministry wants and what companies can provide,” he said.