'Shift to new financial reporting norms to impact cos'

Indian firms preparing to shift to the International Financial Reporting Standards may see an impact on their earnings during transition to new norms from IGAAP, a global body of professional accountants has said.

Construction companies may see a sharp fall in their earnings, while some other sectors may see their profits moving north wards, Get Through Guides CEO Vandana Saxena Poria, who coordinated an ACCA (Association of Chartered Certified Accountant) survey on IFRS told PTI here.

"Firms may see a huge impact, either positive or negative, on their earnings during their transition to IFRS. This may up the earnings of some industries while the construction industry is likely to see a fall in profit," Poria said.

Warning that Indian firms should learn from the experience of Europe, which suffered from lack of preparedness during the migration to IFRS, she said all stakeholders in the country should be adequately educated about IFRS.

"Only around 1,500 accountants in India have the required skills to handle the new accounting standards. A key challenge, during the implementation, will be ensuring that firms, auditors, regulators and the investment community are appropriately skilled to apply and interpret IFRS," she said.

"Initial transition will be a challenge given differing recognition and measurement criteria for assets and liabilities. These will impact earnings," she added.

Indian companies are expected to migrate to IFRS by 2011 to bring a host of benefits to local firms, including reduced barriers to enter global capital markets.