The Institute of Chartered Accountants of India recently submitted to the Ministry of Corporate Affairs a tentative roadmap for IFRS (International Financial Reporting Standards) implementation, its president was quoted saying. The roadmap suggests a phased implementation:

April 1, 2015: Companies with net-worth exceeding Rs 1,000 crore;

April 1, 2016: Companies with net-worth between Rs 500 crore and Rs 1,000 crore;

April 1, 2017: All remaining listed companies (that is, with net-worth less than Rs 500 crore).

This is a significant deferment compared to the original timeline of April 1, 2011, proposed by the Ministry. There is some merit to the deferred dates as the IFRS standards are currently undergoing change, and a stabilised set of standards is not expected until 2015.

However, there are several ‘gaps’ in Indian GAAP, such as accounting for acquisitions or derivatives, leading to diverse practice. It would be desirable for stakeholders relying on financial statements to have a comprehensive set of standards to evaluate transactions by companies. The ICAI should also issue accounting guidance in key areas such as business combinations, financial instruments and so on, where Indian GAAP currently does not provide sufficient guidance.

You can list your preference shares

Securities and Exchange Board of India recently approved the SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013. This provides a regulatory framework for issue and listing of non-convertible redeemable preference shares, as also listing of privately placed redeemable preference shares.

Tricks of business valuation

The Companies Bill proposes that valuation of any property, stocks, shares, debentures, securities or goodwill, or any other assets or net worth of a company or its liabilities shall be made by a person with requisite qualifications and experience, and registered as a valuer under prescribed terms and conditions. The valuation should follow prescribed rules. Further, the valuers would be appointed by the Audit Committee, if any available, or the Board.

The valuations could vary from fixed tangible assets such as land, buildings, plant and machinery to complex financial instruments, including options, swaps, and so on. Other valuations for intangibles range from simple customer relationships to complex in-process research and development assets. Further, the valuations of business too are fairly complex and vary depending on the business model, maturity of the business, industry lifecycle stage, and so on. Valuation today has developed into a complex subject, with several valuers specialising in possibly just one area, say financial instruments.

Therefore, when the valuation-related rules are written, it is important to recognise these complexities and ensure the qualifications and experience prescribed take into account the complexities involved in that asset/ industry. A one-size-fits-all approach would not work, and might end up providing a tangible asset valuer the registration to value a complex financial instrument.

— Grant Thornton

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