IFRS implementation in India!

There’s a lot of excitement and anxiety in the Indian accounting circles in regards to the implementation of the IFRS (International Financial Reporting Standards) also known as Ind AS however not many people know what is IFRS or Ind AS.

Indian Accounting Standards (Ind AS) are based on and substantially converged with IFRS Standards as issued by the Board. IFRS standards are globally accepted and used for presentation of financial statements and majority of the developed economies have implemented them. The standards are developed by International Accounting Standards Board (IASB) and used by countries like UK, European Union, Australia, Canada, Middle East etc. The convergence ensures that companies in India release the financials in the same language the global businesses use world over. This will result in the domestic companies becoming more acceptable globally and also entail investments from foreign funds and investors. India has not adopted IFRS Standards for reporting by domestic companies however has issued a formal roadmap on how it will be implemented.

For companies, other than insurance companies, banking companies, and non-banking finance companies the mandatory adoption of Ind AS is as follows:

	Phase 1	Phase 2
Mandatory Adoption*	FY 2016-17	FY 2017-18
For Listed Companies	All companies listed or in the process of being listed with net worth >= INR 500 crore (US$ 72 million approx.)	All companies listed or in the process of being listed not covered in Phase I
For Unlisted Companies	All companies with net worth >= INR 500 crore (US$ 72 million approx.)	Companies having a net worth >= INR 250 crore (US$ 36 million approx.)
For Group Companies	Applicable to holding, subsidiaries, joint ventures, or associates of companies covered in (a) and (b) above
*Source is IFRS.Org

 

For NBFC’s it as follows:

	Phase 3	Phase 4
Mandatory Adoption*	FY 2018-19	FY 2019-20
For Listed Companies	All companies listed or in the process of being listed with net worth >= INR 500 crore (US$ 72 million approx.)	All companies listed or in the process of being listed not covered in Phase 2
For Unlisted Companies	All companies with net worth >= INR 500 crore (US$ 72 million approx.)	Companies having a net worth >= INR 250 crore (US$ 36 million approx.)
For Group Companies	Applicable to holding, subsidiaries, joint ventures, or associates of companies covered in (a) and (b) above
*Source is IFRS.Org

For insurance companies and banks the Indian authorities are working on coming up with revised dates as they could foresee massive challenges in accepting the new standards especially huge issues with the IFRS 9. The standard states that the companies need to book all the foreseeable loses even if they are not absolutely certain, the companies would still need to provide certain percentage for Expected Credit Losses (ECL). For the Indian banking system which currently is under huge pressure due to constant rise in Non-Performing Assets on the back on some of the largest scams ever taking place in the Indian corporate sector namely the PNB, PMC, ICICI scams it is not surprising that the delay has been OK’d by the authorities.

Nevertheless the companies have started to already implement the new standards including preparing the comparable from prior year as the standard requires the financials to always accompany previous year’s numbers so that the investors have a better view of the state of company. Using the new standards is one of the many steps the government has been taking to make the Indian economy more inclusive and huge initiative towards the ease of doing business objective where India has been progressing over the last few years.

It remains to be seen how soon all of the Indian companies are going to implement the new standards especially how does the markets react when the banks implement and possible uptick in the NPA’s, it’s definitely one of the best things happened to the business sector in the recent times. Obviously everyone will now need to learn the IFRS or Ind AS standards, therefore qualifications like ACCA would be a huge help for anyone who aspire to join the industry as it will give them the edge over students who haven’t already been trained on these standards.

About Author

Zaheer Sayed, is one of the oldest ACCA members in India having passed out ACCA exams in December 2007 from London. Has vast work experience of over 14 years, having worked with Ernst and Young in Stat Audits to working as Associate Director at the UBS Bank, has in-depth knowledge of finance and accounting world. On academics side, has been teaching for almost 10 years, with ACCA teaching experience of over 6 years specialising in Reporting, Tax and Audits. Has also co-authored over 20 titles for a leading publication house in Pune on varied topics like Economics, Audit, Accounting, etc.