A Move to Global Financial Language: It's Advantage India Inc.

It is 1st April 2016. The time has arrived.

This will go down as an historical day for India Inc. And no, this is not an April fool joke.

This is the day India joinsa group of over 100 countries on a global stage.

The large publicly listed companies are now required to adopt the new Indian Accounting Standards (Ind AS) which are substantially converged to the International Financial Reporting Standards (IFRS). Thisplaces India on a global IFRS map alongside countries like Canada, Japan, Hong Kong, Korea and whole of the European Union (EU).

India has made a big leap forward in the financial world of increasing volume of international transactions, cross border listings and acquisitions though it will not fully adopt IFRS. There are some differences between Ind AS and IFRS. This means that the financial statements of companies will speak an international language but with a slightIndian accent. This may at timesmake statements difficult to interpret outside India.

The locally flavoured accounting standards are being adopted in a phased manner depending on stock market listing, net worth and whether the company operates in financial or non-financial sector.India will over the next few years hope to experience the positivity seen from IFRS adoption in the EU.

The mandatory IFRS adoption in the EU has most likely shown benefits like lower cost of capital, improved liquidity, investment efficiency and international capital flows. These benefits would be most welcomed by Indian companies looking to go global as also the international companies looking to invest in India.

A global financial languagewill further improve the transparency of India Inc. and provide a boost to the idea ofissuing “Masala Bonds” in international market and promotion of “Make in India” brand.

This change is more than a financial reporting issue. It will affectaccountants, internal and external auditors, tax professionals, senior management, lawyers, analysts and regulators as they come to grips with the new world. It is a huge change, the scale of which is often underestimated, but for now it is all “Advantage India Inc.”

Author

Saket Modi is a Chartered Accountant and CFA® charter holder based out of London. He has spent considerable time working, advising and training in matters relating to IFRS, in particular, financial instruments. He has worked with clients and organisations from over 30 countries in Europe, Africa, Middle East and Asia. He has written material on IFRS for a global professional institution based out of UK and was invited by the International Auditing and Assurance Standards Board® (IAASB®) to present on IFRS 9 Financial Instruments.