Chronologically put, the developments can be broadly summarised as follows:
•
Institute of Chartered Accountants of India (ICAI) released concept
paper on convergence in October 2007 laying down a road map for
achieving convergence with IFRSs, with a view to make India
IFRS-compliant.
• Ministry of
Corporate Affairs (MCA) nominates President (ICAI) as member of IFRS
Core Group under the Chairmanship of Secretary (MCA) in the last quarter
ended September 2009.
• ICAI had in November 2009 come out with indicative implementation programme
•
A meeting of the Core Group constituted by the Ministry of Corporate
Affairs for convergence of Indian Accounting Standards with
International Financial Reporting Standards (IFRS) from April, 2011 was
held on 11 January 2010 under the chairmanship of Shri R. Bandyopadhyay,
Secretary, Ministry of Corporate Affairs. The meeting was attended by
officials from Ministry of Finance, SEBI, RBI, IRDA, C&AG, PFRDA,
ICAI, Industry representatives and other experts
•
The Ministry of Corporate Affairs had on 22 January 2010 issued a press
release announcing a roadmap to IFRS convergence in India commencing 1
April 2011.
• The MCA issues Frequently Asked Question's (FAQ's) on 4 May 2010.
• MCA seeks final public comments/ suggestions mid December 2010 on Prime Ministers Office's (PMO's) suggestion.
•
Press release by MCA on 17 February 2011 announcing convergence with
IFRS as per road map given in press release of 22 January 2010 - meaning
from 1 April 2011. The press release clearly mentioned that all
accounting standards, schedule VI and XIV are ready and shall be
notified shortly.
• Press release by MCA on 25 February 2011 Notified 35 Converged Accounting standards
•
However, the press release of 25 February 2011 clarified that
Implementation schedule in a phased manner shall be announced on a later
date to be confirmed after clearance from revenue and other departments
on issues such as tax etc.
• On 2
March 2011, MCA announces the revised schedule VI for all companies and
clearly highlighting that this has nothing to do with Indian converged
standards - meaning for all companies. Further, the revised schedule VI
is expected to be applied by all corporate for year ending 31 March 2011
as well as previous year comparatives.
•
On 14 March 2011, the applicability date/ period was removed from the
website and was re-instated on 18 March 2011 which as of now, when this
article is being drafted remains for years ending 31 march 2011 and
previous year comparatives.
The initial press release of 17 February 2011, announcing that IFRS in India convergence is on from 1 April 2011 had the following introductory text....
'...Availability
of essential financial information about a company to its shareholders
and other stakeholders in accordance with internationally accepted
financial norms are considered as an integral and important part of good
corporate governance. To ensure this and to implement the G-20
commitment to achieve a single set of high quality global accounting
standards, the Government has taken a decision to achieve convergence of
Indian Accounting Standards with IFRS in a phased manner
beginning with April, 2011 in accordance with the roadmap suggested by
Core Group and Technical Groups set up by the Government.
India's
commitment to the policy of 'convergence' of Indian Accounting
Standards with IFRS would allow it to consider local economic conditions
and environment while preparing converged accounting standards, thus
duly and adequately safeguarding the interests of Indian
companies/enterprises. The convergence with IFRS would provide reliable
and comparable financial information to investors globally. Such
converged accounting standards also aim at bringing more transparency in
financial matters, thus seek to protect the interests of investors and
improve standards of good corporate governance. They would also enhance
the global competitiveness of Indian Industry...'
Let us now focus on two concepts/messages which the MCA press release was trying to communicate:
1. 'internationally accepted financial norms'
The final Indian Converged standards (IFRS in India) have the following significant carve outs:
•
Equivalent of IFRIC 4: 'Arrangements comprising lease', primary
covering power and telecommunication industries has been deferred
•
Equivalent of IFRIC 12: 'Service concession Arrangements', primary
covering infrastructure industry in a public private partnership like
toll roads/ bridges etc has been deferred
•
Equivalent of IFRIC 15: 'Agreements for construction of real-estate',
primary covering real estate industry has not been considered in the
notified converged standards
• Ind
AS 106, Exploration for and Evaluation of Mineral Resources, has a foot
note which states that this standard will be applied with modification
from a date to be notified later on
• Equivalent of IAS 41 standard on Agriculture has not been notified
•
Equivalent of IAS 26 - Accounting and reporting by retirement benefit
plans and Equivalent of IFRS 9 - Financial instruments has also not been
notified.
There are some other significant 'carve outs' within the standards notified, which are not discussed here.
One
probably need not been an expert to conclude whether, this set of
notified accounting standards with the kind of 'carve outs' it currently
has will make the Indian financial statements internationally
acceptable.
2. 'duly and adequately safeguarding the interests of Indian companies/enterprises'
This
is a very critical aspect, considering that India is a sovereign nation
and should obviously be considerate towards its own companies and
enterprises. Some of us will now therefore appreciate that the
significant carve outs were made probably to duly and adequately
safeguard the interests of Indian companies/enterprises
This raises a pertinent analysis related to 'IFRS in India' which you might want to consider -
•
Some of the industries which are being impacted by these carve outs,
has some of the largest foreign investment or are likely to have
significant foreign investment in future.
•
If the original IFRS is understood by the companies and their
managements in similar industries (some of them significantly larger
than their Indian counterparts) in say Europe or South Africa or
Australia or Brazil or Russia or China etc as well as their
shareholders, then whose interests is the Government trying to protect
in India..
• Even worse, some of
these companies and industries will now present original IFRS for the
foreign shareholders but a different diluted set of IFRS (Indian
Converged standards) for the Indian stakeholders
•
Besides the whole idea was to get Indian corporate to prepare globally
accepted financial statements which would reduce reconciliations, and
multiple set of financial statements.
•
Indian Government, regulators and the way India Inc has reacted to the
entire episode is trying to indicate that the Indian businessmen,
professionals, shareholders, investors or Government are completely
incapable of understanding and applying some of these standards which
are acceptable globally in one form or the other.
Now to summarising the 'the Great Indian Corporate confusion':
•
India announces with full fanfare that India is likely to adopt IFRS in
ICAI concept paper released in 2007. The concept paper was of course
prepared by pure technicians, accountants/professionals
•
Then the PMO commits to G- 20 that India will adopt IFRS in one form or
the other, and this then leads to a big circus like situation
• Suddenly, the professionals, ICAI, regulators, Government and business houses scramble to decide,
• will IFRS apply to ,
• in what form,
• whether to converge or adopt
• when will it apply to
• They then realise that
• Indian Institute of Chartered Accountants has just about introduced its IFRS certificate course
• Very few professionals in India have any form of IFRS practical exposure
• The accounting profession at large is not prepared
• Regulators are not prepared
• Business houses are not well prepared
• Etc etc
•
In spite of all this one must admit that the Accounting Standard board
of ICAI did a wonderful job of drafting almost all converged Accounting
standards in a span of about 6 months, as first daft was ready by around
September 2010
• Then of course
the general public at large kept guessing in what is going to happen on
the IFRS front till the series of press releases in February 2011
already discussed earlier
• Now for
the icing on the cake, while there is so much noise on the IFRS front,
MCA announces drastic changes on the disclosure requirements by
announcing revised schedule VI for all companies (even if IFRS converged
standards were not meant to apply to you). And these detailed
disclosures are more or less based on IAS 1/ Ind AS 1 - Presentation of
financial statements.
• So while
the top 300-400 companies along with resources at their disposal were
unable to gear up for IFRS convergence even in a diluted form, the
entire country is now expected to disclose matters which companies who
apply full IFRS in other countries disclose
We had
all read recently on how the Hon. Supreme Court reacted to some matters
related to corruption. If you are an interested party in the IFRS story,
you don't need to be Supreme Court to conclude - 'what the hell is
happening in India - on the IFRS in India and corporate regulatory
front.
About Company - Rhapsody, incorporated in 2009 is an accounting KPO (Knowledge Process Outsourcing) largely focusing on IFRS practice & other areas. The broad level services currently offered are IFRS Practice/GAAP accounting,IFRS Education & training and IFRS Corporate & Business Advisory. Rhapsody Services provide Solutions & Training for IFRS in India .
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