20 January 2011

FT: India’s accounting system into line with the International Financial Reporting Standards

The planned rule changes were supposed to bring India’s accounting system into line with the IFRS followed in the European Union and other countries.

The Indian government had envisaged a phased transition from April.

However, the Federation of Indian Chambers of Commerce and Industry, one of the country’s most powerful business lobbies, recently asked for the implementation date to be deferred, arguing that the timing was “highly unworkable and unfair”.

Following intense lobbying, the government could agree to such a delay, according to a senior official at the corporate affairs ministry, which is overseeing the changes.

“There is a very real possibility that the implementation of the IFRS will be pushed back to 2012,” the official said.

While the finalised rules have not yet been published, they are expected to differ from IFRS in several areas, including agriculture and revenue recognition for property developers.

This has alarmed the International Accounting Standards Board, which sets IFRS.

It is asking India to follow the example of Brazil and South Korea in adopting the IFRS system in its entirety.

Sir David Tweedie, IASB chairman, could publicly disown the new Indian standards if the tweaks go ahead, according to a person familiar with the situation.

Ruth Picker, global IFRS head at Ernst & Young, said: “If an Indian company wants to say that its financial statements are in accordance with IFRS, then it needs to comply with IFRS as issued by the IASB.”

Jamil Khatri, head of IFRS at the Indian arm of KPMG, said the goal of making Indian accounts more familiar to foreigners might not be achieved “if the government implements only 60-70 per cent of IFRS”.

The IASB and the corporate affairs ministry declined to comment.

The senior ministry official said: “The divergences are very small and they don’t pose any serious threat to the IFRS model.”

The coherence of IFRS implementation is a sensitive topic because the IASB is trying to woo the US into adopting IFRS in place of its GAAP system.

A decision is due this year.

The G20 group of nations has called for the development of a single, high-quality set of global accounting standards in the wake of the financial crisis.

Press release

© Financial Times