Ind AS conversion is a strategic issue. The board of directors and management need to explain to the stakeholders on changes and impact arising from Ind AS conversion. Ind AS effects all the verticals of the company and it should be well planned.
If there is one thing you can take from reading this blog, it is: Develop your Ind AS implementation roadmap soon.To kick off this roadmap, we suggest that you ask your team a few preliminary questions. The answers to these questions should help you gauge the potential effect of Ind AS on your company. For example:
- Have we identified main differences between Ind AS and Indian GAAP?
- How would an Ind AS conversion affect our business?
- Would we need to review existing business contracts?
- How many of our business units already understand Ind AS and its related impacts –the skill sets from which can be leveraged?
- How will our financial statements look on a pro forma basis, once converted to Ind AS?
- How might our access to capital be affected by an Ind AS conversion?
- Do we have a major ERP or finance transformation project which is currently ongoing or envisaged?
- Are we involved in or considering a major acquisition?
- What is the level of Ind AS knowledge within a company, both domestically and globally?
- Have we assessed the cost and benefits of adopting Ind AS?
- Do we need to revise the controls framework in order to continuously meet the risk management objective?
Other stakeholders may also be involved, including the board, audit committee, shareholders, your external and internal auditors and your regulators. A carefully designed roadmap may empower your company to convert smoothly and effectively. By taking a measured and informed approach, you increase the likelihood of identifying values in the exercise that otherwise may be reactive and solely compliance driven. The value may show itself in the form of:
- Reduced costs of implementation
- Standardization and centralization of statutory reporting activities and related controls
- Greater consistency of accounting policy application
- Possibly core finance transformation
Steps to Implementation
Your Ind AS implementation roadmap will be significantly more detailed than merely addressing these few questions. Given the far-reaching scope of Ind AS, your roadmap should include assessing the potential effect on each department in your organisation, including:
- Human Resources
- Information Technology
- Investor Relations
You would need to develop your own roadmap by considering the key points along the items shown in the pointers below
- Evaluation of key arrangements
- GAAP differences identification
- Financials & system-related impacts
- Technical evaluation & memos
- Identification of policy choices
- Benchmarking with industry peers
- Engaging with fair valuers
Implementation of Ind AS
- Identification of policy choices on transition date
- Redesigning chart of accounts
- Adjustment entries outside systems
- Initiating system changes
- Finalization of technical positions and accounting policies
Preparation of Financial Statements under Ind AS
- Going live on systems
- Opening Balance Sheet and Equity Reconciliations
- Comparative Information & Equity/ Profit Reconciliations
- Preparation of first Ind AS financial information
- Presentation & Disclosure under Ind AS
Experience from Ind AS Implementations
- You can learn the following lessons based on experience in Ind AS conversion carried out over the past few years.
- Most investors believe Ind AS will improve the quality of standalone and consolidated financial statements.
- Larger companies typically convert earlier and devote considerable resources to educating and training their boards, staff, and investors.
- There is widespread agreement that Ind AS will make financial statements easier to compare across countries and competitors.
- Treat Ind AS not as a purely technical exercise, but a strategic one which requires organizational commitment.
- Effort to convert is often underestimated.
- Lead time from announcement to reporting date Is short.
- Late start to converting often results in an escalation of costs.
- Striving to achieve “stable” state for Ind AS reporting is important. Change is continuous.
- Companies need to take a holistic approach towards Ind AS conversion resulting in an effective conversion effort.
- Impacts of Ind AS conversions are often underestimated.
- The conversion process extends beyond accounting to process, people, controls, and technology.
Therefore Implementation of Ind AS is a mammoth task which should be well planned with proper documentation. A successful conversion effort that can stand up to the scrutiny of regulators and analysts will require a lengthy exercise and commitment.