India is likely to be guided by the International Financial Reporting Standards (IFRS), which are accepted by over a hundred countries. This is even as the US’ commitment to the adoption of IFRS is in doubt.
As long as the US does not adopt IFRS, there is no need for India to rush into it, say India Inc insiders.
Critics point out that people who do not want Indian accounting standards, Ind-AS, are arguing that the US itself is distancing from IFRS. This is a dim view and India’s interests will be well served if convergence with IFRS is achieved, say IFRS supporters.
The CA Institute President, Mr Jaydeep Shah, asserts that India’s decision on aligning with IFRS will not be dictated by the US stance on the matter.
‘Holistic view’
“Our decision will be taken by the Corporate Affairs Ministry. It will be done after taking a holistic view and not be country-based.
The Ministry will certainly evaluate the international scenario”, he said when asked if India will put the brakes on IFRS, now that the US’ commitment is in doubt.
Currently, the US, Japan and India are the three main economies that have not adopted IFRS. Canada, Brazil and Russia moved to IFRS last year.
For some years now, India has been developing its own accounting standards (Ind-AS) that seeks to converge with the IFRS. But the implementation date of Ind-AS is yet to be finalised.
Mr Shah said the implementation date would be decided by the Corporate Affairs Ministry. He added that he hoped IFRS convergence will get a leg up once the new Companies Bill is enacted.
Policymakers here have taken the stance that they would not adopt IFRS, but would only look to converge with it. Ind-AS has many carve-outs from the internationally accepted reporting rules.
A recent 137-page report released by the staff of the US Securities and Exchange Commission (SEC) had declined to recommend IFRS.
There is no recommendation on moving US GAAP (Generally Accepted Accounting Principles) to the international reporting rules, which has led many to conclude that the US SEC will not accept IFRS.
This will put convergence attempts between US GAAP and IFRS on the backburner. Currently, there is a gap in accounting treatment in such areas as leasing, insurance and losses on financial instruments.
The convergence process, which started in 2010, has dragged on without any success.
Accounting experts point out that it would not be proper to compare India’s approach with the US stance.
The US concerns are different in the sense that the US GAAP is far more advanced than IFRS. The US GAAP has for long been based on fair value. India has not even migrated to fair value, it was pointed out.
India is yet to take a final stance on the latest US position on IFRS. But there is every possibility that it will continue its march towards convergence with IFRS, despite roadblocks, say experts in the accounting community.