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Sending a strong message to the global investor community, India has come up with a completely new set of accounting standards, taking a big step towards “convergence” with IFRS.
On Friday, the Corporate Affairs Ministry issued 39 new Indian accounting standards (Ind-AS) and notified the roadmap for their adoption by companies in India.
However, companies in the financial sector — banks, insurers and NBFCs — have been kept out of this.
Nearly 125 countries in the world currently required the use of International Financial Reporting Standards (IFRS) — a set of globally recognised standards – for all or most of their listed companies and financial institutions.
India Inc to benefitThere are numerous benefits that will come the way of India Inc from the latest move, say corporate observers. It will further strengthen India’s ability to attract foreign capital through inbound investments or through access to global capital markets, said Sudhir Soni, a partner with an Indian member firm of EY global.
Helen Brand, Chief Executive of ACCA, a global body for professional accountants, said it was encouraging to see India continue to express support for IFRS as a single global set of accounting standards.
“Wholesale adoption of IFRS in India will bring welcome transparency to the market and do a great deal to harmonise the work of professionals”, Brand, who is visiting India, told BusinessLine .
Currently, India is not looking at wholesale adoption of IFRS, but taking sure footed steps (like the latest one) towards converging with IFRS.
Sai Venkateshwaran, Partner and Head of Accounting Advisory Services, KPMG, in India said the notification of the IFRS-converged standards fills up significant gaps in the current accounting guidance.
“India can now claim to have financial reporting standards that are contemporary and virtually on a par with the best global standards. This will in turn improve India’s place in the global ranking on corporate governance and transparency in financial reporting,” he said. Ashish Gupta, Partner, Walker Chandiok & Co, said Ind-AS is now a reality and this move will resonate positively with the investor community. He said the Ministry has pleasantly surprised with the adoption of two new accounting concepts-1) Accounting for financial instruments (AS 109) and b) Accounting for Revenues (AS-115).
India will be adopting these prior to other IFRS compliant countries, he said.
The roadmapThe Ministry has mandated a phased approach for the adoption of IND-AS.
In the first phase, applicable from accounting period beginning on or after April 1, 2016, all companies having a net worth of over ₹500 crore will be covered.
The second phase applicable from April 1, 2017, covers listed companies with net worth of less than ₹500 crore and unlisted firms having net worth of over ₹250 crore and less than ₹500 crore.
Voluntary adoption will be permitted for accounting periods starting on or after April 1, 2015.
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