Companies Act amendment for IFRS convergence in winter session

The Government will come out with an amendment in the Companies Act in the winter session of Parliament, to converge the Indian accounting norms with international standards IFRS by April 2011.

"Discussions have taken place on the IFRS at the meeting of the Committee of Secretaries (CoS). As soon as they give us the minutes of its meeting, we will take it up with the Cabinet. By all means, in the winter session of Parliament we will bring in the necessary amendment in the Companies Act 1956 for facilitating convergence with the IFRS," a senior MCA official told PTI.

Even as over 1,000 large Indian companies are gearing up to prepare their account books as per the IFRS by the coming fiscal, some issues including tax implications under the new accounting regime are yet to be resolved.

Also, various stakeholders have given their inputs to the Corporate Affairs Ministry, the nodal ministry for formulating these standards, for consideration.

An important issue that needs to be resolved is imposing tax on notional loss or gain.

"We will hold discussions with the Revenue Department in the Finance Ministry in this regard after the Diwali break," the official said.

The taxation committee of Institute of Chartered Accountants of India (ICAI), which is helping the Government with preparing for the IFRS convergence, is working on the tax implications and will soon hand over their recommendations to the Government, the source said.

Another issue that needs a re-look is projecting value of an asset in the account books. While some are in favour of arriving at the value in terms of historical cost, others believe in the fair value concept.

In accounting, fair value is defined as an estimate of the potential market price of a good or service, taking into consideration factors like acquisition, production and distribution costs and replacement costs.

However, the historical cost does not consider these factors and instead is calculated at the initial value.

Soon after the issues are resolved, the National Advisory Committee on Accounting Standards (NACAS), the final recommending body for IFRS standards, will notify all the 37 standards, the official said.

According to the roadmap laid out by the MCA, companies with a networth of over Rs 1,000 crore will have to prepare their account books as per the IFRS by April 2011.

Further, while scheduled commercial banks and urban cooperative banks will adopt it from April 1, 2013, all insurance companies will convert their opening balance sheets with IFRS from April 2012, while large listed non-banking finance companies (NBFCs), will converge their opening books of accounts with IFRS norms from April 1, 2013.