PHD Chamber of Commerce and Industry

India for adopting international financial reporting standards: But will not blindly follow - Secretary Corporate Affairs

Mr. Anurag Goel, Secretary, Union Ministry of Corporate Affairs said that the Government was keen about the convergence of Indian Standards with International Financial Reporting Standards (IFRS) in view of the increasing degree of globalization taking place in the Indian corporate sector. But he pointed out that such standards would not be blindly adopted since Indian standards should reflect certain local and domestic perspectives.

While addressing a Seminar on “Convergence to IFRS: Roadmap and Implementation Issues” organized by PHD Chamber today in New Delhi, Mr. Goel said that “Indian Standards are evolved through a consultative process with stakeholders and are not imposed through fiats as may be the case in some countries,” and added “ we will retain the rights to look at IFRS, to adopt or adapt it looking at the ground level realties in the country.” He also mentioned that he apprised the international experts who called on him the thought process of India on Standards and they had appreciated the Indian stand.

The requirement of public interest entities in India to comply with IFRS from April 1 2011 was announced by ICAI. Presently, there is a global momentum towards accounting convergence and high quality financial reporting. IFRS has recently emerged as the world’s best rated accounting framework. In 2000, the International Organization of Securities Commission formally accepted the IAS core Standards as a basis for cross-border listing globally. IASB, a private sector body develops and approves IFRS.

Mentioning that compliance to IFRS is a complex task, Mr. Goel observed that there should be options and alternatives available to countries, which are adopting the Standards. There are legal and regulatory requirements to be complied with. The Standards should be in harmony with RBI guidelines, listing requirements of SEBI etc. Therefore, he suggested, nation-wide consultations among all stakeholders to discern the pros and cons of the Standards, their impact and co-coordinated and harmonious action among them to develop sustainable partnerships.

Mr Goel also suggested that during the transition phase to IFRS, more informed discussions and research should take place within ICAI, which is the regulatory body, to identify the likely impact of new Standards on the corporate sector. There should be continuing orientation to the Chartered Accountants and other audit professionals. Business Associations like PHD Chamber should sensitize their members about the importance of complying with Standards and advantages that they can derive from it. Regulatory authorities like RBI and SEBI and the Ministry of Corporate Affairs should play an important role in consolidating the efforts for convergence to the IFRS, he pointed out

Earlier in his key note address, Mr Amarjit Chopra, Chairman, Accounting Standard Board, ICAI said that a significant number of Indian Standards have been revised to reflect the IFRS norms. A few of them are yet to be notified or revised. He said that India needs to move forward in complying with IFRS. But there are certain changes that are required in the regulatory framework to ensure consistency and align these frameworks. He underscored the need for harmonizing IFRS framework with RBI rules and listing requirements of SEBI, where there are still areas of inconsistencies.

Mentioning that the new accounting standards would not put the industry into difficulties, Mr Chopra said that the benchmark for the application of the standards have to be decided. “Should it be applicable to companies having assets worth Rs 25 crore, Rs 100 crore or more has to be decided,” he said. Conceding that implementation of IFRS is an arduous task, he said that there could be a lot of difficulties in defining effective rate of interest rates. There are many blue chip companies, which can source funds at a lower rate of interest. But under IFRS regime, such comforts cease to operate, he said.

Regarding the application of Standards on Small and medium Enterprises (SMEs), Mr Chopra said that there could be three alternatives. They are evolving a new set of Standards for them as per IASB standards or relaxation of existing Standards or taking them (SMEs) out of the purview of the Standards.

Mr. Lalit Bhasin, Chairman, Corporate Affairs Committee, PHD Chamber emphasized that the issue of overlapping jurisdictions and inconsistent regulations need to be addressed urgently for which the Ministry of Corporate Affairs must initiate a meaningful dialogue with other departments and ministries.