Sebi today said companies coming out with offer documents from April 2017 should present their financial accounts in compliance with Ind AS, the accounting standards that are converged with global norms.
Indian Accounting Standards (Ind AS) will be compulsorily applicable on many companies from the 2016-17 fiscal starting tomorrow.
To provide more clarity for issuer companies, Sebi has come out with a detailed road map.
This is to align "the disclosure requirements for financial information in the offer document as specified under Sebi (ICDR) Regulations, 2009 with the requirements of Ind AS specified under Ministry of Corporate Affairs roadmap", Sebi said in a circular.
Under Sebi (ICDR) Regulations, 2009, entities need to disclose of financial information for each of the five financial years immediately preceding the filing of the offer document while following uniform accounting policies for each of the financial years.
Up to March 31, 2017, the issuer companies can file their latest financial statements under Indian GAAP while from April 1, 2017, it should be done as per Ind AS, the regulator said.
According to the regulator, for issuer companies to which Ind AS is applicable from FY 2017-18, the timeline with respect to filing of offer documents would be followed with a time lag of one year.
"The issuer company may, at its discretion, choose to present all the five year periods using the Ind AS framework instead of accounting standards otherwise applicable for such period(s)," the circular said.
Further, the issuer company should clearly mention that the financial information has been disclosed in accordance with Ind AS while suitably explaining the difference between Ind AS and the previously applicable accounting standards.
They would also be required to disclose the impact of transition to Ind AS, Sebi noted.
"All the financial information disclosed in the offer document for any particular year shall be in accordance with consistent accounting policies (Ind AS or applicable accounting standards)," it added.
Under the roadmap of the Corporate Affairs Ministry, Ind AS would be mandatory for companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of Rs 500 crore or more, from April 1, 2016.
Sai Venkateshwaran, Partner and Head of Accounting Advisory Services, KPMG in India, said the Sebi circular provides clarity to companies that are in the process or contemplating a listing on the Indian markets.
"However, it remains to be seen whether this hybrid approach will be accepted by the the investor community or whether they would expect companies to actually present all five years of the track record period according to Ind AS," he noted.
Companies would need to weigh in on the feasibility of preparing the five-year Ind AS financial statements vis-a-vis the information gaps that the hybrid approach may create, he added.
The circular provides a phased in approach to require companies to start presenting Ind AS financial statements beginning with offering documents filed between April 1, 2017 to March 31, 2018.