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Proposed roadmap for IFRS adoption in India

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10 Apr 2014

The Institute of Chartered Accountants of India (ICAI) has publicly released a summary of its recommendations on the timetable for the adoption of Indian Accounting Standards (Ind AS), which are largely converged with International Financial Reporting Standards (IFRSs). The ICAI recommendations, which will be considered by the Indian Ministry of Corporate Affairs (MCA) in determining its final decision on implementation, propose that listed and large entities should mandatorily apply Ind AS in consolidated financial statements for accounting periods beginning on or after 1 April 2016, with other companies being able to apply Ind AS on an irrevocable voluntary basis.

India originally intended to converge with IFRSs in a phased approach beginning in 2011, but transition to Ind AS was postponed and a transition date is yet to be formally announced by the Indian Ministry of Corporate Affairs (MCA).

The latest recommendations by the ICAI, which may or may not be accepted by the MCA, propose the following:

  • Ind AS will be applied by the following classes of companies in preparing consolidated financial statements for accounting periods beginning on or after 1 April 2016, with comparatives for the year ending 31 March 2016 or later:
    • Entities with equity or debt securities listed, or in the process of listing, in or outside India
    • Companies having a net worth of Rs. 500 crore or more, with net worth calculated by reference to the stand alone audited balance sheet of companies as at 31 March 2014 (or the first balance sheet after that date)
    • Holding, subsidiary, joint venture or associate companies of the above two classes of entities
  • Companies meeting the criteria for applying Ind AS would be required to continue applying Ind AS in subsequent consolidated financial statements even if they no longer meet the criteria for mandatory application
  • Companies not required to apply Ind AS would apply existing notified Accounting Standards (AS) ('Indian GAAP'), which would also be used to prepare individual financial statements of the companies applying Ind AS in their consolidated financial statements
  • Companies not required to apply Ind AS can optionally apply Ind AS instead of existing Indian GAAP on a voluntary basis, but the election would be irrevocable and consolidated financial statements would be consistently prepared in accordance with Ind AS in all subsequent periods.

The roadmap for financial institutions and insurance companies will be determined in a separate process, in consultation with the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (IRDA).

In preparation for adoption of Ind AS, the MCA initially notified 35 Indian Accounting Standards that are converged with, but not identical to, IFRSs. Subsequently, amendments and additions to Ind AS have been made as the IASB has issued pronouncements. As a result of this process, modifications made to IFRS in promulgating Ind AS may prevent an entity following Ind AS from making an explicit and unreserved statement of compliance with IFRSs (Ind AS 1 Presentation of Financial Statements requires a statement of compliance with Ind AS, not IFRSs).

IASB Chair Hans Hoogervorst recently gave a speech at an event hosted by the ICAI in New Delhi where he invited India to move to 'full' IFRS compliance soon due to his belief that only adoption of IFRSs can lead to a single set of high quality global accounting standards. In a recent blog post (link to ICAI website), K Raghu, President of the ICAI, noted in the following in response:

Here I must mention that we have very consciously decided to converge with IFRS and not fully adopt it, mainly because a resurgent India is very different from its peers in the West or elsewhere, with its own priorities and preferences. There is no change in that stand as of now. However, in the longer term we may consider his viewpoint, but only after sorting out some crucial issues and testing the impact of our converged Ind AS on [the] corporate sector.

Click for access to the ICAI recommendations (link to ICAI website).

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