 |
IFRS |
| |
|
|
|
|
| |
Frequently Asked and Anticipated Questions (FAAQ)
- When is the right time to start the preparations for IFRS?
- How long will it take to move to IFRS?
- Do we need any expert consultation for transition to IFRS?
- Will our current statutory auditors be in a position to guide us in transition to IFRS or do we need any other independent consultant? Will there be possibility of conflict of interest if statutory auditors get involved in transition to IFRS?
- Will there be dual reporting standards – Indian GAAP (for standalone reporting for local filing and tax filing) and IFRS (for consolidated reporting)?
- Will IFRS replace Indian GAAP in the primary set of accounting principles for the purpose of maintenance of primary books of account?
- Will it be mandatory to change/replace current information technology (IT) systems / platforms to move to IFRS?
- What is the expected cost of transition to IFRS?
- Will IFRS be mandatory for the first quarter of the first year of reporting (30 June 2011) or it will be mandatory only from 30 June 2012 for the purpose of quarterly reporting?
- Are tax laws also being amended to take into account changes expected under IFRS?
- When is the right time to start the preparations for IFRS?
India is changing its financial reporting standards from Indian GAAP to International Financial Reporting Standards (IFRS) w.e.f April 1 2011 (i.e . April 1 2011 to March 31 2012 is the first reporting period and March 31 2012 would be reporting date).
Although the first annual financial statements impacted will be March 31, 2012, to truly understand when an entity has to be ready for the adoption of IFRS, we need to look at IFRS 1 - First Time Adoption of International Financial Reporting Standards. As per IFRS 1, following are the relevant dates in Indian scenario:
Date of Reporting: - 31 March 2012
Date of Adoption:- 1 April 2011
Date of Transition:- 1 April 2010 (Refer below)
IFRS 1 requires the comparative statement as at 31 March 2011 to be as per IFRS and all the adjustments relating to convergence to be made in the opening balance sheet as at 1 April 2010.
Convergence to IFRS is not merely changing from one set of accounting policies to another. The preparations for convergence to IFRS depends upon the nature of business, volume of operations, countries of operations (domestic and foreign), group structure (subsidiaries, associates, joint ventures), growth strategy (organic or inorganic), level of computerization, technical skill levels of staff members and many other such factors. Considering the above, the convergence process could be long drawn process which envisages well planned project implementation strategy.
Ideally, the companies should have initiated the preliminary assessment of the impact due to convergence by now.
- How long will it take to move to IFRS?
Convergence to IFRS is not merely changing from one set of accounting policies to another. The preparations for convergence to IFRS depends upon the nature of business, volume of operations, countries of operations (domestic and foreign), group structure (subsidiaries, associates, joint ventures), growth strategy (organic or inorganic), level of computerization, technical skill levels of staff members and many other such factors. Considering the above, the convergence process could be long drawn process which envisages well planned project implementation strategy.
- Do we need any expert consultation for transition to IFRS?
This depends on the competence of the internal team. However, due to the complexities involved, we would advice companies to consult an expert for undertaking the convergence project effectively.
- Will our current statutory auditors be in a position to guide us in transition to IFRS or do we need any other independent consultant? Will there be possibility of conflict of interest if statutory auditors get involved in transition to IFRS?
As per the code of professional ethics issued by the ICAI, an auditor cannot give opinions / consultancy on accounting. Thus, it will amount to conflict of interest if statutory auditors get involved in transition to IFRS.
- Will there be dual reporting standards – Indian GAAP (for standalone reporting for local filing and tax filing) and IFRS (for consolidated reporting)?
Presently, it is assumed to be mandatory only for consolidated accounts while the stand alone financials are expected to still be on Indian GAAP. The above assertion was confirmed by the article in Economic Times dated 17 August, 2009 about SEBI allowing listed companies to present their consolidated financials as per IFRS while for standalone financials, Indian GAAP will continue.
- Will IFRS replace Indian GAAP in the primary set of accounting principles for the purpose of maintenance of primary books of account?
It is assumed that the primary books of accounts will continue to be maintained as per Indian GAAP for standalone reporting to local authorities.
- Will it be mandatory to change/replace current information technology (IT) systems / platforms to move to IFRS?
It depends on the current IT systems / platform and the volume & complexities of transactions that may require IFRS adjustments. Besides, it will also depend upon the nature of business, volume of operations, countries of operations (domestic and foreign), group structure (subsidiaries, associates, joint ventures), growth strategy (organic or inorganic), technical skill levels of staff members and many other such factors.
- What is the expected cost of transition to IFRS?
The expected cost of transition will depend upon the nature of business, volume of operations, countries of operations (domestic and foreign), group structure (subsidiaries, associates, joint ventures), growth strategy (organic or inorganic), level of computerization, technical skill levels of staff members and many other such factors.
- Will IFRS be mandatory for the first quarter of the first year of reporting (30 June 2011) or it will be mandatory only from 30 June 2012 for the purpose of quarterly reporting?
At this stage it is not very clear as to how the capital market regulator i.e SEBI is viewing and preparing for the convergence. However, it is assumed that the June quarter of 2011 will be published as per Indian GAAP as was the practice followed in many countries.
- Are tax laws also being amended to take into account changes expected under IFRS?
Presently, we do not prepare separate books of account for tax filing. Also, it is assumed that the stand-alone financial reporting to local authorities and tax filings with the Income Tax authorities would be based on Indian GAAP and the consolidated financials published by listed companies would be based on IFRS.
Thus, neither there have been any changes in the tax laws related to IFRS nor we expect any changes in the same.
|
|
|
|