The Federation of Indian Chambers of Commerce and Industry (FICCI) urges the government to delay implementation of of compliance with IFRS (International Financial Reporting Standards) from April 1, 2011 to a date when companies are better equipped to deal with the new envisaged accounting concepts and standards.
In a representation to Ministry of Corporate Affairs, describing the current deadline of April 1, 2011 for compliance with IFRS standards as “highly unworkable and unfair.” FICCI points out that at the current juncture, global standards themselves are up for revision.
Some of the changes being made in IFRS include:
i. Entire financial instruments (viz. derivatives, loans, and investments) accounting and reporting framework is getting revamped with effect from 1st April, 2013
ii. IFRS / IAS Standard 12 on Accounting for Income taxes is being revised and revised standards is in exposure draft stage
iii. IFRS / IAS Standard 18 on Revenue Recognition is being revised and revised standards is in exposure draft stage
iv. IFRS / IAS Standard 19 on Accounting for Employee Benefits is being considered by International Accounting Standards Board for comprehensive revision
"In view of this and the lack of clarity on issues such as whether preparation of financial statements will be as per IFRS model or Schedule VI of Companies Act and applicable taxation regime after implementation of IFRS, FICCI questions the practicality for Indian companies to incur substantial IT and manpower training cost and change over to present IFRS when several important parts of it are already pronounced obsolete by IFRS standard setters themselves. A more rational approach, the chamber suggests, would be to adopt the final standards as and when announced," says the group.
FICCI notes that the new Companies Bill is pending finalization, as is the Draft Tax Code. This would also impact the industry as it will have to grapple with so many issues simultaneously. "There is lack of alignment between Companies law and IFRS. Also there seems to be some thinking on asking companies to prepare dual set of financial statements, one as per erstwhile Indian GAAP and another as per IFRS. This would lead to immense confusion and increase the hardship and cost for these companies. Moreover, adoption of IFRS requires a lot of preparatory work for companies in terms of comprehending, training and modification of software and IT systems," says the FICCI.
FICCI therefore suggests deferring the implementation date of 1st April, 2011 to a date when Indian companies are better equipped to deal with the new envisaged accounting concepts and standards. It has suggested that the Converged Accounting Standards be made available in the public domain not later than quarter of April - June 2011 and industry be provided at least one year’s preparatory time from the date when the harmonised, notified and legislated converged Accounting Standards and other related matters (such as Tax, Companies Bill, SEBI disclosure, etc.) are in place. "Without this, not only will Indian companies be unable to make a smooth or intended transition to a new accounting system, such introduction at this stage shall be counterproductive," says the FICCI.
MORE ARTICLES ON IFRS