India will not accept the use of the International Financial Reporting Standards (IFRS) for taxation purposes; instead, companies will have to continue with the historical system of accounting, reports the Financial Express.
“Our system is not ready yet to accept the IFRS system as a recognised system for income-tax purposes,” revenue secretary Sunil Mitra told the Financial Express. “When you switch over from a historical costing system to a market value system, you can assign valuations which can lead to significant under-reporting of profits. This could lead to under-reporting of corporate income.”
Mitra, however, added that firms can still keep their accounts in the IFRS system for the benefit of investors.
“It is our conscious decision not to accept IFRS system for tax purposes. And we are not alone here; most countries in the world have followed this approach. Even the US does not have IFRS for tax purposes,” says Mitra.
MORE ARTICLES ON IFRS