India should adopt IFRS without changes: Ernst & Young

Financial consultancy firm Ernst & Young today said the government should adopt the International Financial Reporting Standard (IFRS) without any changes.     

"IFRS-compliant financial statements are more comfortably accepted worldwide. If we are converting we should convert fully. We should make changes in our accounting standards according to the IFRS and not mould it (IFRS) as per our norms," E&Y India IFRS leader Dolphy D'Souza told PTI.     

The transition would enable Indian entities to be fully IFRS compliant and give an "unreserved and explicit statement of compliance with IFRS" in their financial statements.     

Generally, he said, the financial statements which are fully IFRS-compliant have a higher brand value globally as compared to the financial statements that are not fully IFRS compliant.     

 

"If IFRS are not adopted as they are, significant efforts involved in the conversion process, may not yield the desired benefits to converting companies and to the nation," D'Souza said.     

Welcoming the formation of a core group by the Ministry of Corporate Affairs for deliberating upon the conversion of India's accounting standards to the IFRS, D'Souza said, "it is now important for the government to bring out a clear cut report mentioning all details."

The Core Group, comprising representatives from SEBI, RBI, ICAI, IRDA and banks, among others, are preparing the roadmap for the convergence of Indian accounting standards with the IFRS by April 1, 2011.

There is a need for clarity about the time by which companies need to convert their accounts as per IFRS; if there are changes to be made to regulatory frameworks, then by when that should happen; changes in accounting standards should be on a fast-track basis; how indirect and direct taxes would be levied, D'Souza said.

"Conversion to IFRS is a tedious task involving significant time, cost and efforts... For large groups, convergence to IFRS may take even more than one year... To facilitate the same, the roadmap should be absolutely clear on the above aspects," he added. 

For conversion to IFRS, changes would be needed in the Companies Act, Banking Regulation Act, Sebi Regulations/ Guidelines and the Listing Agreement, IRDA Regulations and Electricity Act.     

Changes would also be required in the direct and indirect taxes, he said.     

"The proposed direct taxes code fails to mention anything about the IFRS, the committee should take into concern this aspect too," D'Souza said.