Report on new accounting standards soon

The final roadmap on the transition from the Indian Generally Accepted Accounting Practices (IGAAP) to the International Financial Reporting Standards (IFRS) is expected soon, as a core group constituted by the ministry of corporate affairs (MCA) for its implementation is meeting by the end of this month.

The three issues likely to be taken up by the group in the meeting would be: change in eligibility criteria, the timeline for calculating eligibility criteria for converging into new standard, and if non-banking finance companies (NBFC) should be treated at par with banks, said Jamil Khatri, executive director and head, accounting advisory services, KPMG, on the sidelines of a seminar organised by the Indian Chamber of Commerce (ICC) here today.

Based on the recommendations of the core group, the ministry of corporate affairs, on 22 January 2010, had announced the approach and timeline for achieving convergence with IFRS.

The announcement lays down a phased approach to convergence and is similar to the proposed approach of other countries such as Japan and the US.

“There will be two separate sets of accounting Standards under Section 211(3c) of the Companies Act, 1956. The first set would comprise the Indian accounting standards, which are converged with the IFRS and which shall be applicable to the specified class of companies in a phased manner.

The second set would comprise the existing Indian accounting standards and would be applicable to other companies,” said Khatri.

Madhu Sudan Kankani, director, accounting advisory services, KPMG India said, “Adopting IFRS would not only make Indian companies at par with other global companies but shall also increase India’s marketability globally in terms of foreign investment.

Convergence will impact most business aspects including structuring of contracts with customers and vendors, performance appraisal parameters and reward plans and managing external investor relations and communications.”