Government moves to align IndAS with global accounting standards

India gradually started adopting IndAS from 1 April 2016 in place of the earlier Generally Accepted Accounting Principles (GAAP). IndAS is mostly based on IFRS; However, given the legal framework of India and the practices followed in different regions, certain changes, called carve-outs, were introduced.

Bridging these gaps by removing the carvings will make it easier to compare Indian and non-resident companies.

Giving information about the developments, a person said, “Maintaining the performance may raise doubts in the minds of foreign investors whether the manner in which the financial statements of Indian businesses are prepared is similar to that of countries that fully comply with IFRS. follow.” The move comes at a time when India is seeking more foreign investment in manufacturing and infrastructure to prop up the economy from the devastating impact of the pandemic. With India pursuing long-term capital in infrastructure from pensions and sovereign wealth funds by offering tax incentives, banks are not in a position to offer long-term financing for long-term projects.

The implementation of IFRS is a work in progress, as banks and insurance companies are yet to adopt it.

Experts said that some carvings may exceed their usefulness and, therefore, need to be reviewed. These include flexibility in IndAs not to reclassify liability from non-current to current category in the balance sheet in case of breach of debt contract, flexibility to show foreign currency convertible bonds as equity in certain circumstances, and measurement is included. Siddharth Talwar, Partner, CFO Services, Grant Thornton Bharat LLP, said the carrying value of property, plant and equipment acquired before FY16 is as per the previous accounting arrangements.

“A further alignment will, on the one hand, enhance comparability and consistency in financial reporting, and on the other hand, may require corporates to make more decisions and, therefore, the resulting complexity and additional disclosures,” Talwar said.

Madhu Sudan Kankani, Partner, Deloitte India, said that full adoption of IFRS for financial statements will bring many additional benefits, especially for companies looking to list overseas as well as global mergers and acquisitions. .

“It would be a welcome move if the regulators consider eliminating the differences between Ind-AS and IFRS. Presently, in the treatment of bargain purchases in business combinations, treatment of actuarial gains/losses for the benefit of employees, There exist differences in the use of discount rates, options provided at the time of initial adoption of Ind-AS on investment properties and in some cases such as property, plant and equipment, etc,” Kankani said.

According to Amarjeet Chopra, former president of the Institute of Chartered Accountants of India (ICAI), it is okay to have some degree of deviation.

“It needs to be appreciated that we are a sovereign nation with our own accounting and oversight bodies. We do not need to copy word for word any standard laid down by the International Accounting Standards Board.”

The IndAs were to be implemented in banking with effect from April 1, 2018, but various considerations, including the requirement of additional capital, which may be due to the implementation of Ind AS109 (Financial Instrument), have postponed it, he said. .

An email sent to the spokesperson of the Ministry of Corporate Affairs for comments remained unanswered at the time of publication.