Indian companies’ financial statements may for some time to come not talk the same language as those of their global peers.
This is despite the Indian policymakers’ more than decade-long efforts at aligning the Indian accounting framework with the globally recognised ones such as the International Financial Reporting Standards (IFRS).
“We are almost there, but not fully there”, said a corporate observer, remarking about India’s convergence roadmap with IFRS.
Listed Indian companies cannot avoid preparing IND-AS financial statements and voluntarily present “full IFRS” financial statements, as allowed by market regulator SEBI.
For company law compliance purpose, listed companies have to mandatorily present IND-AS financial statements, say accountancy experts.
So as investors, don’t be surprised if listed Indian companies—especially those listed abroad-- present two sets of financial statements—one under IND AS for company law compliance and other voluntarily under “full IFRS”.
Already, at least seven Indian companies listed abroad present “full IFRS” financial statements on a voluntary basis.
India has last week ushered in a new set of accounting standards—39 in number and termed IND AS—aimed at convergence of the Indian accounting framework with globally recognised IFRS. It is not full adoption of IFRS, but only convergence.
There are now several “carve-outs” under the recently notified IND-AS framework—which shows that India has not fully adopted IFRS.
Listed companies cannot prepare “full IFRS” financial statements instead of IND-AS until the time new company law is amended to explicitly provide that “full IFRS” can be an alternate framework used by companies, said Sai Venkateswaran, Partner and Head of Accounting Advisory Service, KPMG in India.
“Companies will need to prepare their financial statements in accordance with Ind AS for Companies Act compliance, and can only present full IFRS financial statements as an additional set of financial statements”, he said.
SEBI allowing companies to provide “full IFRS” financial statements can only be incremental to Companies Act—it cannot override it, he said.
Charanjit Attra, Executive Director, 3i Infotech, said Indian Companies who have voluntarily adopted full IFRS would have to rethink on opting for the option of presenting full IFRS financial statements as IND AS financial statements would be very similar to full IFRS financial statements.
“A lot would also depend upon the how the Mandatory carve outs impact the financial reporting. If the impact of mandatory carve outs is substantial, it would be difficult for the Companies to maintain two set of financial statements”, he said.
Sandip K Khetan, Partner, S.R.Batliboi & Co, said implementation of accounting standard on revenue (IND-AS 115) and financial instruments (IND AS 109) can be a significant challenge for companies that are voluntarily adopting “full IFRS”.
“They will be required to make a policy decision to adopt these standards for international reporting as well. If they decide to do so then they will ahead of the curve internationally as well and there financial statement may not be comparable with global peers.
However they will be mandatorily require to adopt IND –AS 109 and 115 for reporting obligations under Indian Companies Act 2013. So this creates a dilemma for these companies and they need to choose carefully”, he said.
Ashish Gupta, Partner, Walker Chandiok & Co said companies will have to present financial statements as per Ind-AS for statutory compliance (Companies Act compliance).
SEBI’s option of submission of voluntary IFRS may continue but then it may continue as a separate arrangement between listed companies and SEBI (a regulatory authority). However, for all statutory purpose, companies within the bracket of Ind AS would need to continue submit Ind AS only, he said.