Finally, there may be some light at the end of the IFRS tunnel.
The accountancy body, CA institute has fired another salvo – the third in the last decade – on the IFRS convergence front.
In a well thought out move, the institute has recommended a new roadmap for convergence of Indian accounting standards with the International Financial Reporting Standards (IFRS), which has now emerged into an international language of accounting.
“The new roadmap recommended by us will create a good platform for more foreign investments to flow into India. Foreign investors who are now used to IFRS will be able to relate well to the Indian financial statements prepared under Ind AS and make increased investment decisions,” K Raghu, President, Institute of Chartered Accountants of India, told
Banks and insurance companies have been kept out of the new roadmap recommended by the institute.
Novelty factor The novelty this time round is that Ind AS – India’s answer to IFRS – is sought to be made mandatory only for preparation of consolidated financial statements and not for standalone financial statements.
New roadmap The new roadmap, which suggests the launch date of April 1, 2016 for convergence with IFRS, has replaced the one proposed by the institute in 2012.
The earlier roadmap, which looked at April 1, 2015 as the launch date for Ind AS implementation for companies with net worth of over ₹1,000 crore did not pass muster with the Corporate Affairs Ministry.
In its new roadmap, the CA institute has recommended that all listed and unlisted companies having net worth of over ₹500 crore be required to prepare their consolidated financial statements only under Ind AS with effect from the accounting year beginning April 1, 2016.
This would require such companies to prepare previous year comparatives in Ind AS for the year 2015-16.
Consolidation Recommending Ind AS as the basis for consolidation of financial statements is also “very harmonious” with the new company law, which mandates all companies (both listed and unlisted) with subsidiaries to prepare consolidated financial statements, say corporate observers.
Hitherto, only listed companies were preparing consolidated financial statements and that too for compliance with the listing agreement (SEBI requirement).
Aman Bhargava, Director, Financial Reporting Advisory Services, Grant Thornton, said the revised Ind AS roadmap appears to be a well thought out and progressive move.
“Ind AS will bring about enhanced rigour and transparency due to increased disclosure as well as consistency in preparation of financial statements in Indian corporates,” he said.
Tax hurdle The new roadmap which focuses on Ind AS adoption only for consolidated financial statements may help surmount the income tax hurdle, say some tax experts.
The taxman is mostly concerned with standalone financial statements and implementing Ind AS with consolidated financial statements will not have tax implications, they said.
In effect, the tax hurdle that stalled IFRS convergence has been surmounted through the CA Institute’s latest approach, it was pointed out.