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| Implementation likely to be deferred again |
| Joe C Mathew / New Delhi Feb 06, 2012, 00:35 IST |
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India has already deferred plans to implement a new set of accounting rules compatible with International Financial Reporting Standards (IFRS). This may take even longer than expected.
Reasons: Lack of clarity on the new implementation schedule being planned by the ministry of corporate affairs (MCA) and the absence of such provisions in the pending Companies Bill, according to experts. According to the original schedule notified by MCA, the first phase of IFRS convergence should have been in place on April 1, 2011.
The second phase was slated for April 1, 2013, and the third a year later. The ministry, however, deferred the first phase, without giving any fresh deadlines for implementation. The accounting standard-setting body, Institute of Chartered Accountants of India (ICAI), had suggested April 1, 2013, as the next deadline. The MCA remains tight-lipped.
The new standards, considered more reliable, consistent and uniform, are meant to enhance the credibility of businesses by incorporating more disclosures that lead to good corporate governance. The recognition of notional losses and gains was one aspect of the new system. “We have no clarity on this. MCA is yet to formulate its view,” says Jamil Khatri, global head (accounting advisory), KPMG. He recalls the ministry had earlier said implementation would happen once tax issues were sorted out. “These changes were expected through DTC (direct taxes code). Now that DTC is getting delayed and, apparently, no regulatory activities happening at the MCA level, you cannot say what will happen,” he adds.
In fact, MCA is just one step away from implementing the new standards, as it has already notified 35 Indian Accounting Standards (Ind-AS) that are IFRS-compatible. Notifying Ind-AS in February 2011, the ministry had spoken about the subsequent notification of the implementation schedule.
Corporate affairs minister Veerappa Moily had hinted the government finds no urgency in implementing the new standard when developed economies such as the US and Japan are yet to implement it.
Echoing a similar view, Amarjit Chopra, chairman of ICAI’s IFRS Implementation Committee, says the implementation has already been extended once and one must look at the schedule in the US and Japan.
“The US will implement it in 2014 and Japan in 2015. So, why not take a categorical stand that our implementation will be aligned with these countries?” he asks. According to Chopra, the committee is preparing guidance-notes and clarifications on industry-specific issues without worrying about the schedule. “Three of four guidelines for new accounting standards have already been cleared by the IFRS implementation committee. Inventory valuation is one of these,” he notes.
Dolphy D’souza, partner and national leader, IFRS services of Ernst & Young, says he expects Ind-AS to be implemented from 2013. If required, carve-outs would be made by standard setters in Ind-AS to deal with the foreign exchange issue, he adds.
“In my mind, the challenge for successful implementation of Ind-AS is the successful issuance of TAS (tax accounting standards) by the finance ministry,” D’souza says.
According to sources close to the TAS preparation, the finance ministry has already prepared two draft tax accounting standards.
“At least 10 more are ready to be finalised and notified,” says a tax expert with direct knowledge of the development. “There may not be any delay on TAS front.”
ICAI President G Ramaswamy is hopeful of an early implementation of Ind-AS. “I believe the new accounting standards will be automatically in place once the Companies Bill, 2011 gets enacted,” he says.
Not many share Ramaswamy’s optimism. Quite a few feel the Bill does not specify Ind-AS and further amendments may be required in the Bill if it gets passed in the current form.
Recently, the government had allowed companies to exercise Accounting Standard 11, which pertains to “the effect of changes in foreign exchange rates”, optionally and, if needed, avoid following this standard up to March 31, 2020.
Some of the experts felt this as an indication of the government’s plan to keep in abeyance the implementation of new accounting standards.
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