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  Is India Inc. prepared for transition to International Financial Reporting Standards (IFRS)?  
  Prof A R Subramanian
Professor, Finance & Banking

  The Financial Reporting requirements for corporates and institutions in India are in for a major transition from the Indian Generally Accepted Accounting Standards i.e. Indian GAAP, being recommended by the Institute of Chartered Accountants of India (ICAI) and prescribed by the National Accounting Committee on Accounting Standards (NACAS) in terms of Companies Act, 1956 towards a common and standardized Reporting based on sound commercial principles rather than rule based.

Accounting Standards are the policy documents issued by the recognized expert accounting body relating to various aspects of measurement, treatment, presentation and disclosure of accounting transactions and events. In the Indian context, The ICAI is the body discharging the act. In the global context,International Accounting Standards Committee i.e. IASC is the body prescribing IFRS.

India is among 150-odd countries that have decided to adopt IFRS from 2011 onwards.

Come 2011 and India Inc. will be experiencing drastic changes in the way annual financial statements are reported to the stakeholders. India is among the 150-odd countries that have decided to adopt the International Financial Reporting Standards (IFRS) from the financial year beginning 2011. However, the moot question remains: is corporate India ready to join the ranks of the EU, Australia, Singapore, and Sri Lanka, which are among the 100 odd IFRS-compliant countries? IFRS compliance would require changes right from the grassroots level, beginning with academic inputs and training, fair value based accounting from the erstwhile historical value and so on. And this is not going to be an easy task, given the limited time frame before the new standards come into force. The transition will be a tough challenge for the country as it requires a shift in the academic approach, along with regulatory challenges. The requirement for trained professionals will be in great demand and the Government will have to play a larger role in countering industry problems. This transition will be posing another major hurdle for the Accounting profession across the country with lot of scope for the new blood who are willing to enter the profession. At the same time, there will be considerable pressure from the multinational professional firms such as Big 4 i.e. PriceWaterhouse Coopers, KPMG, E & Y and Deloitte and Touch, the Accounting and Assurance Consulting firms to the local firms who have to prepare themselves in facing the challenge. Further, the corporates / industries are likely to face is a talent crunch since, even in the current scenario, there is a scarcity of qualified professionals in the accounting field. Corporates have to adopt a planned strategy as early as possible, as the failure to do so would put them in a tight spot. The understanding and implementation of IFRS is not easy, and only if companies start following certain common standards right from now, would they be able to shift towards the new standards from 2011. MBA Schools and Management Institutes have to introduce specialized courses to train and equip them with relevant academic inputs before their entry into the corporate world.

The implementation of IFRS would also necessitate certain modifications in the Income-tax Act, as well as the Companies Act to complement the changes arising out of the new standards. India’s journey towards global integration in terms of financial markets has given strengths to the corporates which are widely accessing the cheaper funds and the number of companies listed in NASDAQ and other stock exchanges across the global stock exchanges have considerably increased indicating the robustness of the Indian corporates emerging as Indian Multinational with global presence. When companies are crossing national boundaries, reporting financial statements under IFRS is a necessary to facilitate cross-border transactions and makes comparisons easier. There is a need to give accounting staff appropriate training. Companies need to draw up detailed plans for migrating to IFRS as early as possible, to make the transition smooth and flawless. Accounting teams should be conversant not only with new standards but also with information technology to support the new financial reporting architecture.

IFRS, previously known as International Accounting Standards (IAS), are standards and interpretations adopted by the International Accounting Standards Board (IASB). IASB adopted IAS in April 2001, and renamed it IFRS.

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