After the enactment of the Companies Act, 2013, the ministry of corporate affairs has now shifted its focus on rolling out international reporting standards for Indian companies which were to be implemented beginning April 1, 2011.
According to the draft plan, the ministry wants to implement the international financial reporting standards (IFRS) beginning with companies that have a net worth of over Rs 1,000 crore from April 1, 2015, an official told The Indian Express.
In the second phase, both listed and unlisted companies with a net worth of over Rs 500 crore but less than Rs 1,000 crore will have to converge with the international accounting standards from the financial year beginning April 1, 2016.
IFRS had been put on the back burner by the government given issues raised by corporates, and unresolved taxation issues. Industry bodies had sought postponement arguing the industry needed more time to prepare.
The IFRS-converged accounting standards deal with mark-to-market projections and valuation of financial assets among other things.
The implementation is expected to cause some upheaval in companies finances in the initial stage as the standards call for projecting assets real value. Various sectors, including banking and real estate would be hit, experts have argued.
The Institute of Chartered Accountants of India (ICAI) has been asked to conduct a sector-wise study, elaborating on the impact the implementation will have on the sectors, the official said.
As such, all Indian companies listed overseas or doing business on foreign land currently prepare financial statements as per the international standards.
However, banking companies would be exempt from complying with the IFRS. In the third and fourth phase, beginning April 1, 2017, smaller companies would need to prepare their accounts as per the international standards.
Having put in so much of efforts into it, I think we should go ahead with it. The main sectors which are likely to be impacted include oil and gas, finance, telecom and infrastructure companies. However, on other industries, I dont see much impact, Amarjit Chopra, former ICAI president, said.
Over 100 countries have accepted IFRS while India has converged its accounting standards with the international reporting standards. Currently, the US, Japan and India are the three main economies that have not adopted IFRS while Canada, Brazil and Russia switched to IFRS last year.