The Indian Minister of Finance has proposed that Indian companies adopt the Indian Accounting Standards (Ind AS), which are substantially converged with International Financial Reporting Standards (IFRS), from 2016-2017 financial years, with voluntary adoption permitted from a year earlier.
"There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS)," says Finance Minister Arun Jaitley.
India originally intended to converge with IFRSs in a phased approach beginning in 2011, but transition to Ind AS was subsequently postponed without any announced transition date from the Indian government prior to this proposal, according to Deloitte.
In preparation for adoption of Ind AS, the Indian Ministry of Corporate Affairs (MCA) initially notified 35 Ind AS that are converged with, but not identical to, IFRSs, and subsequently amendments and additions have been made to Ind AS to reflect those made by the International Accounting Standards Board (IASB).
Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies, among others.
Standards for the computation of tax would be notified separately.
The interaction of accounting standards and the Indian tax system has been one of the key concerns about India's adoption of accounting standards converged with IFRS.
Proposed amendments to the relevant tax codes released as part of the budget papers propose removing references to "accounting standards" in relation to the computation of income, instead permitting the Central Indian Government to notify 'income computation and disclosure standards' to be followed when determining tax liabilities.