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India may apply IFRS converged standards from 2016-2017

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11 Jul 2014

The Indian Minister of Finance, Arun Jaitley, has proposed in his maiden budget speech that Indian companies apply Indian Accounting Standards (Ind AS), which are substantially converged with International Financial Reporting Standards (IFRS), from 2016-2017 financial years, with voluntary adoption permitted from a year earlier.

India originally intended to converge with IFRSs in a phased approach beginning in 2011, but transition to Ind AS was subsequently postponed without any announced transition date from the Indian government prior to this proposal. In preparation for adoption of Ind AS, the Indian Ministry of Corporate Affairs (MCA) initially notified 35 Ind AS that are converged with, but not identical to, IFRSs, and subsequently amendments and additions have been made to Ind AS to reflect those made by the International Accounting Standards Board (IASB).

Mr Jaitley's budget speech, delivered on 10 July 2014, stated the following as part of the planned initiatives for the financial sector and capital markets:

There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS). I propose for adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies etc. Standards for the computation of tax would be notified separately.

The interaction of accounting standards and the Indian tax system has been one of the key concerns about India's adoption of accounting standards converged with IFRS. Proposed amendments to the relevant tax codes released as part of the budget papers propose removing references to "accounting standards" in relation to the computation of income, instead permitting the Central Indian Government to notify 'income computation and disclosure standards' to be followed when determining tax liabilities.

The full text of the speech is available at indiabudget.nic.in/ub2014-15/bs/bs.pdf.

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