The convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS) from the fiscal of 2011-12 will provide Indian industry better opportunities to raise funds outside India, attract foreign investment and maintain transparency levels, said experts at a workshop on IFRS here on Friday.
While the roadmap for transition to IFRS represented complex legal and regulatory challenges for companies in manufacturing, technology and real estate sectors, it would be in the best interests of industry that exceptions to the globally accepted accounting framework were kept minimal, they said while addressing the event organised by the Confederation of Indian Industry (CII).
The Institute of Chartered Accountants of India (ICAI) has circulated exposure drafts for consultation among stakeholders. Once finalised, the set of standards will be submitted to the National Advisory Committee on Accounting Standards for eventual vetting by the Law Ministry, T. N. Manoharan, Chairman, CII National Committee on Accounting Standards and past president, ICAI.
“Education and training will be the buzzword in the IFRS segment,” Mr. Manoharan said.
The IFRS would provide Indian companies a level playing field with international peers since Ind-AS, the Indian IFRS equivalent, did not allow multiple approaches of financial reporting, said Dolphy D'Souza, IFRS Leader – India, Ernst & Young.
The Ind-AS, however, adopted only one approach, of recognising actual gains and losses fully, eliminating the benefits of multiple choices approach, he said. Making exceptions to IFRS should be made only in the rarest of rare situations where national interest is involved, he said.
The two key issues for corporate houses that were adopting IFRS standards were when corporate entities wanted to represent forex gains and losses in long term accounts deferred over a period of time (since volatility in forex rates induce spikes in P&L account) and when real estate entities had to switch from the percentage of completion method prevalent in India now to the completed contract method as mandated by IFRS.
Mr. D'Souza suggested that Indian corporate entities planning for IFRS compliance start robust quarterly reporting on these lines from the fiscal of 2010 so that they were better prepared when the convergence happened the following year.
V. Sankar, CFO, Hinduja Foundries, said early and steady approach to adopting IFRS was important since the effort required for transition from Indian Generally Accepted Accounting Principles to IFRS was often underestimated. “A late start often results in escalation of costs. Several companies are now only starting to explore benefits of IFRS implementation.”
K. Sridharan, Chairman, Task Force on GST and DTC, CII Southern Region and S. Chandramohan, Convener, Economic Affairs & Taxation Panel, CII Tamil Nadu, also participated at a panel discussion that highlighted industry perspectives in adapting to IFRS.