Conversion is much more than a technical accounting issue. IFRS in India may significantly affect a company’s day-to-day operations and may even impact the reported profitability of the business itself. Conversion brings a one-time opportunity to comprehensively reassess financial reporting and take ‘a clean sheet of paper’ approach to financial policies and processes.
It is imperative for companies which have already performed a diagnostic study for IFRS to revisit their diagnostic study, as IFRS itself is a moving target and gets regularly updated. Companies also need to consider that some IFRS may not be applicable when the diagnostic study in process, but their applicability in future may result in material changes to the financials. Understanding IFRS and its implications is a business imperative for Indian companies.
In July 2014, the Finance Minister in his Budget speech proposed the adoption of the new Indian Accounting Standards (Ind AS – the converged IFRS standards) by Indian companies voluntarily from FY 2015-16 and mandatory from FY 2016-17.
In March 2014, the Institute of Chartered Accountants of India (ICAI) submitted to Ministry of Corporate Affairs (MCA) a proposed new IFRS roadmap and convergence plan for India. In the proposed roadmap, the ICAI recommended implementation of Ind AS by select companies only in preparation of their consolidated financial statements.
The new implementation date for Ind AS is awaited from the MCA. It is unclear if the MCA will release a fresh roadmap or just amend the roadmap as submitted by ICAI.
Understanding IFRS/Ind AS and its implications is a business imperative for Indian companies.