The convergence of India's accounting standards with International Financial Reporting Standards (IFRS) are expected to affect the profits, net assets and debt governance of power firms, reports LiveMint.
LiveMint explains that components of electricity prices set by the regulator for future adjustments are not recognized as an asset or liability by the IFRS. Under the Indian GAAP (generally accepted accounting principles), components such as tariff and fuel adjustments are recognized as an asset or liability.
“Under Indian GAAP many indian companies have recognized government promises as revenue and asset. Such companies’ balance sheet will be significantly impacted. Consequent impacts would be felt on ratios, debt covenants, distributable profits, future revenue recognition, etc.,” Dolphy D’Souza, partner and national leader of IFRS services at Ernst and Young, told LiveMint.
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