Sameer Kamboj & Co

Present status of IFRS in India

 
A reliable, consistent and uniform financial reporting is an important part of
good corporate governance worldwide. Different countries have different sets of
Accounting Standards to regulate financial reporting by their corporate sector.
However, with the advent of globalization, investment beyond the boundaries
and trading has increased. The investors, therefore, need a uniform globally
accepted set of Accounting Standards followed by companies so that
comparison across the companies globally is facilitated. Many countries
including India have responded favorably to these requirements.
The International Accounting Standards Board (IASB) has been recognized as
global Accounting Standards setter. Indian Financial Reporting Standards
(IFRSs) formulated by IASB has been adopted by more than 100 countries
(including countries of European Unions, Australia, New Zealand, Pakistan ,
Sri Lanka). Many other countries are expected to either adopt IFRSs in entirely
or converge their own standards with the standards issued by IASB. There was
commitment in G-20 summit held in September 2009 that G-20 Countries (of
which India is also a member country) would converge national Accounting
Standards with IFRS by June 2011.
China has already substantially reformed its own financial reporting standards
through a continuous convergence process and the differences between those
standards and IFRSs are now very small. The Convergence process, however,
has proved to be a great challenge for India. India had to defer the
implementation of converged accounting standards. In recent past, 35 Indian
Accounting Standards have been converged with IFRS but the date of
implementation of the same is yet to be notified by the Government pending
requisite changes in corporate laws, Tax laws and other relevant regulations.
These standards are called ‘Converged Indian Accounting Standards’ or ‘Ind
AS’.
There are certain deviations in ‘Ind AS’ from IFRS. However, few deviations are
unavoidable due to the regulatory and legal framework as well as business
practices which are peculiar to economic environment in India. In order to
minimize the deviations, there is a need to discuss the deviations with IASB to
see if IFRSs could incorporate the Indian concerns and thereby reduce the
deviations.
Further, many IFRSs are undergoing revisions and few new IFRSs are under
drafting stage, which are expected to become effective in the near future.
Hence, the convergence with minimum deviations has to be a continuing
process, if aimed to derive full benefits of the convergence.
One important concern towards the convergence is the fact that IFRS uses fair
value as measurement base for valuing most of the items of Financial
Statements. As such, there is need to ensure that there exists a reliable
mechanism and infrastructure in India for determining and verifying the fair
value of various assets and liabilities with due accuracy. The convergence can,
otherwise, bring unwanted subjectivity and volatility to the financial
statements.
Way through IFRS for Indian Professionals:
The benefits of full adaptation would not stop at the boundaries. It is clear that
the world is moving to international accounting norms and India is almost
uniquely place to become the place of outsource entire IFRS based finance
departments. Our highly educated, English- speaking workforce are prime
candidates to become IFRS experts who can go on to offer IFRS related services
all around the world.
However, the advantage enjoyed by Indian professionals will be short lived if
the country fails to keep up with the demands of the global economy. Whilst
our accountants are acknowledged as some of the best in the world, we must
aware of stiff competition from our neighbors like Sri Lanka and Pakistan, both
of whom have adopted IFRS and are training their accountants accordingly.
If we want of Indian accountants to retain their leading position in the global
market and continue to export their expertise, especially to regions such as the
Middle East, we must ensure that they are trained to the standards employed
by those regions. If our academic institutes are still training Students in Indian
GAAP then the opportunities are more limited.
Undoubtedly, India Chartered Accountants with their education, experience
and capability, have a lot of potential to contribute to the continued
development of this profession. I am optimistic that, in the years to come,
favorable efforts would be taken by ICAI and our Government to remove the
obstacles hindering India’s path towards international standards.
CA Gaurav Gulati