A joint meeting of the Core Group and the two sub-groups was
held on 6 August 2009. At the meeting, the ICAI presented the details of a
comprehensive capacity building programme which it is carrying on to prepare the
Chartered Accountancy (CA) profession for this transition and stated that a
large number of professionals have undergone training and the process is being
accelerated. The Chairman of the Accounting Standards Board of ICAI informed
that the convergence project is at an advanced stage of completion. CFOs present
in the meeting stated that industry was getting prepared. They also requested
amendments to the Companies Act and other Regulations and also the early
exposure of accounting standards which are IFRS compliant, to enable them to
prepare for meeting the deadline.
The main purpose of the Core Group is to issue a road map in
the near term for convergence to enable adherence to the targeted date of 2011.
The author strongly supports the formation of the Core Group
and the issuance of the proposed road map. We congratulate the Ministry of
Company Affairs for its unprecedented and historic action of bringing all the
concerned regulators on a common platform to achieve smooth convergence to IFRS
in India.
We believe that the proposed road map as a minimum should
contain the following :
(i) The date of transition to IFRS and the requirement of
comparable numbers
(ii) Whether IFRS would be applied as they are or there
would be certain carve-in or carve-out to those standards. This is important
so that the entities, which start preparing for conversion, are clear about
the standards that are applicable to them
(iii) Whether the first-time adoption rules under IFRS 1
First-time Adoption of IFRS would be applicable
(iv) The direct and indirect tax implications of transition
to IFRS, including implications under the new direct tax code
(v) Legal amendments needed to the key statutes to achieve
convergence. For example, Companies Act, 1956, Banking Regulation Act
(including its Third Schedule), SEBI Regulations/Guidelines and the Listing
Agreement, RBI Guidelines to Banks/NBFCs, IRDA Regulations, Electricity Act
tax laws especially Income-tax Act, etc. The road map should also cover
whether and how these amendments can be carried out prior to the transition
date
(vi) The ICAI has taken more than seven years to issue the
financial instruments standards from the date of the first issuance of IAS 39
Financial Instruments : Recognition and Measurement. These standards are still
to be notified under the Companies Accounting Standard Rules. If all the IFRS
are to be notified under the Companies Accounting Standard Rules, whether and
how it can be done at least one year prior to the transition date — for
example, would there be a fast tracking process.
Conversion to IFRS is a tedious task involving significant
time, cost and efforts. The experience indicates that for large groups,
convergence to IFRS may take even more than one year. Thus, entities need to
start preparing for transition to IFRS well in advance. To facilitate the same,
the road map should be absolutely clear on the above aspects.
We recommend the MCA should avoid any changes to IFRS. This
will enable Indian entities to be fully IFRS compliant and give an ‘unreserved
and explicit statement of compliance with IFRS’ in their financial statements.
Generally, 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. Also, most developed stock exchanges require financial
statements to be fully compliant with IFRS for listing purposes. 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.
This article is dedicated to the loving memory of my friend
Rahul Roy, who became the President of the Institute of Chartered Accountants of
India at a young age of 33, a record impossible to break. Rahul was a great
professional, a great author and orator but more importantly a good human being.
I have penned 4 small lines in his memory . . . .
Tomorrow may or may not be
The next moment we may or may not see
But no time can wither your loving memories
Those I’ll cherish till the end of time.
