India Inc. gears up for new accounting standards

Indian companies are keen to adher to strict global accounting standards for the preparation of financial statements. Ernst & Young’s 2009 International Financial Reporting Standards (IFRS) Readiness Survey has found that 79 per cent of the firms polled expect the new accounting standards to become effective from 2011 and are confident of meeting that deadline.

IFRS is a set of accounting standards, developed by the International Accounting Standards Board (IASB), a London-based independent body that sets the global benchmark for the preparation of public company financial statements.

The biggest difference between the US-based GAAP and IFRS is that the latter is less detailed. Its guidance regarding revenue recognition, for example, is less extensive than GAAP, and it contains fewer industryspecific instructions. By adopting IFRS, a company will be able to present its financial statements on the same basis as its foreign competitors, making comparisons easier. More than 12,000 companies in almost 100 nations have adopted IFRS, including listed companies in the European Union.

But some bottlenecks remain. Even though 67 per cent respondents in the survey have internally discussed the shift plan at the Board level, as many as 78 per cent are yet to put in place a timetable for the transition. The encouraging sign is that 43 per cent respondents plan to establish a timetable and 32 per cent are going to assign resources soon.

“Our experiences in other parts of the world have shown conversion to IFRS would mean adhering to critical business and regulatory matters such as compliance with debt covenants, modification of IT systems, capital structuring and tax planning,” observes the survey.

—Puja Mehra