The existing option available to Indian companies to follow “full IFRS” should be continued, Hans Hoogervorst, Chairman of International Accounting Standards Board (IASB) has said.
“Removal of this option would be perceived internationally as India moving away from IFRS at a time when Indian Government is making best efforts to get Indian standards closer to IFRS”, Hoogervorst said at KPMG IFRS Conference 2015 at Mumbai on Thursday.
While lauding the pace and determination of the Indian Government towards IFRS convergence, Hoogervorst however said the proposed new Indian accounting standards—popularly known as Ind AS—will not be the same as the International Financial Reporting Standards (IFRS).
The proposed Indian framework has several deviations—termed as carve outs—from the globally accepted IFRS.
Hoogervorst said Indian carve-outs should not only be small, but also preferably have a small and limited life time.
It is important that investors see India’s carve-outs as an intermediant step to full IFRS.
“Don’t expect too much from a investor (foreign investor). They don’t have the time to study the intricacies of national accounting standards. They just want to see a well known brand (IFRS) and then go for it (investments)”, Hoogervorst said.
Currently, there are only seven Indian companies--Infosys, TCS, Wipro, Tata Motors, Tata Steel, Bharti Airtel and Dr Reddy’s Laboratories-- that have voluntarily opted for “full IFRS”.
If the proposed new Ind AS framework were to come into force, there is apprehension among industry honchos and accountancy professionals that India Inc may not continue to enjoy the option of going in for “full IFRS”.
There is no explicit provision in the newly enacted Company Law or in the SEBI’s proposed listing regulations giving such an option (full IFRS) to Indian corporates, according to Jamil Khatri, Deputy Head of Audit, KPMG in India and Global Head of Accounting Advisory Services.
FREEDOM TO DECIDE
Corporate India should stand up and pitch for the freedom to go in for “full IFRS”, said Mohandas Pai, Chairman, Manipal Global Education Services.
“In the next 2-3 months, you (CFOs of Indian companies) should make a case for keeping carve-outs voluntary. The Government should not force carve-outs on us on the pretext that they are protecting us. We don’t want their protection. We want the freedom to decide”, he said in a keynote address at this conference.
Pai said that companies should be allowed to decide for themselves whether carve-outs are necessary or not.
Corporates that adopt “full IFRS” will gain a competitive advantage against competition that stays away from IFRS, he said.
“In Modi’s India, we cannot have second class standards (referring to Ind AS). Government should make carve-outs voluntary so that full IFRS could be opted for by companies”, Pai later told Business Line.