India is among 150-odd countries that have decided to adopt IFRS from 2011 onwards
Author : Darshan Mankad/DNA
Content : Come 2011 and India Inc will experience drastic changes in the way financial statements are reported. India is among the 150-odd countries that have decided to adopt the International Financial Reporting Standards (IFRS) in 2011.
However, the question remains: is corporate India ready to join the ranks of the EU, Australia, Singapore, and Sri Lanka, which are among the 100 IFRS-compliant countries?
IFRS compliance would require changes right from the grassroots level, beginning with academic inputs and training. And this is not going to be an easy task, given the limited time frame before the new standards come into force.
“The transition will be a tough challenge for the country as it requires a shift in the academic approach, along with regulatory challenges. The Institute of Chartered Accountants of India (ICAI) and the government will have to play a larger role in countering industry problems,” said Vijay Mathur, partner, BSR & Co., the Indian arm of KPMG.
He was addressing a technical conference on IFRS, organized by the Confederation of Indian Industries (CII), in association with KPMG India on Thursday. He added that the major problem that industries are likely to face is a talent crunch since, even in the current scenario, there is a scarcity of qualified resources.
“Companies need to start following a planned strategy as early as possible, as the failure to do so would put them in an awkward situation. The understanding and implementation of IFRS is not easy, and only if companies start following certain common standards now, would they be able to shift towards the new standards from 2011,” said Neville Dumasia, executive director, private equity advisory, KPMG India.
Dumasia said that modifications will be required in the Income-tax Act, as well as the Companies Act to complement the changes arising from the new standards.
He said India has begun integrating with global financial markets. When companies are crossing national boundaries, reporting financial statements under IFRS is a necessary to facilitate cross-border transactions and makes comparisons easier, he added.
“There is a need to give accounting staff appropriate training. Companies need to draw up detailed plans for migrating to IFRS as early as possible, to make the transition smooth and flawless,” he said.
Accounting teams should be conversant not only with new standards but also with information technology to support the new financial reporting architecture, Mathus said.
IFRS, previously known as International Accounting Standards (IAS), are standards and interpretations adopted by the International Accounting Standards Board (IASB). IASB adopted IAS in April 2001, and renamed it IFRS.