India's shift to the International Financial Reporting Standards (IFRS) could lead to chaos if the government fails to clarify on areas such as net worth requirements, comparative numbers and the calculation of income-tax, reveals a Livemint report.
Livemint notes that the ministry of corporate affairs announced a three-phase convergence schedule in January but faces questions from auditors.
“The announcement does not elaborate on when the net worth would be determined,” Jamil Khatri, head of accounting advisory services at audit and consulting firm KPMG in India, told Livemint. Khatri explains that Net worth changes every quarter depending on the profitability of the company. "Suppose the net worth of a company is Rs900 crore in the quarter ending December 2010, and suddenly rises to Rs1,000 crore on 31 March 2011, there will be very little time for the company to comply with IFRS,” adds Khatri.
Khatri suggests that companies start evaluating net worth according to existing standards to determine whether it exceeds Rs1,000 crore. He advises those who qualify to start preparing for new accounting standards on 1 April 2011.