Present continuous

In Tamil comedy film Samsaaram Adhu Minsaaram, protagonist Visu — when asked what his youngest son is doing — quips: “He was studying for his SSLC exams; he is studying for his SSLC exams; and he will continue studying for his SSLC exams.” This dialogue comes to mind when one thinks of the attempts India is making to move to International Financial Reporting Standards (IFRS) — christened Ind AS here.

India wanted to implement the standards in 2009; we are still trying to transition in 2016; and it appears we will continue trying to transition to Ind AS in the future as well. Over the past 18 months, the corporate affairs ministry announced roadmaps for different types of entities to transition to Ind AS over the next few years. In the first set, around 350 entities (with a net worth >₹500 crore) were to transition to Ind AS for the quarter ended June 2016. Market regulator SEBI has just given them some cause to cheer.

In a circular issued on July 5, SEBI has extended the date for entities to present their financial statements in Ind AS for the quarters ended June and September 2016 by a month. These statements need to present comparative numbers for the equivalent quarter in the previous year but these statements don’t need to be either audited or reviewed by auditors.

Numbers for the year ended March 31, 2016, need not be provided. For the quarter ending December 31, 2016, in case a listed entity chooses to provide comparatives for the year ended March 2016, the financial statements need to be either audited or reviewed by the auditor.

By doing a bit of crystal-gazing into the future, the circular states that all the relaxations given in the circular would be available to entities that transition in future years also. One of the critical aspects of transitioning to Ind AS is to provide reconciliations to equity and profits from the date of transitioning to Ind AS.

The circular relaxes this by stating that the reconciliations need to be provided only for the year ending March 31, 2017. If one were to summarise the message the circular it is, “Get serious about Ind AS implementation only for the year ending March 31, 2017”. Till they tell us otherwise, that is.

The roadmap for the first set of entities to transition to Ind AS was announced in February 2015. Entities had enough and more time to plan and implement their Ind AS transition. The entities in the first set were the ones with a net worth in excess of ₹500 crore — if anything, these companies have the resources and Balance Sheet strength to seamlessly transition to Ind AS.

There can be no two opinions about the fact that if any regulator provides a relaxation or exemption or makes some law optional, Indian entities are going to grab these freebies with open arms. The SEBI Circular goes against the basic tenets of the Ind AS on First time adoption of Ind AS.

In these days of constant reporting, the time gap between two quarterly closings in a company appears to be only a few days. Hence, entities are bound to welcome the Circular as it gives them some breathing time for reporting in Ind AS.

But dilutions given in the circular contain an embedded message that is a cause for concern: we will never get serious about implementing Ind AS and all it takes is the right type of lobbying to get relaxations. If this happens, IFRS in India will become ‘Indefinite Financial Reporting Standards’.

The writer is a chartered accountant