On PMO advice, corporate ministry to consult companies again on IFRS

NEW DELHI: Less than four months before the big companies switch over to the global accounting format, the government has called for a fresh round of deliberation , creating uncertainty about the roll out of the new global rules of financial reporting.

The ministry of corporate affairs has called for comments from the more than 300 companies that are required to prepare their accounts according to the International Financial Reporting Standards ( IFRS).

These companies can raise any regulatory concerns they may have with respect to the new standards that are to roll out from April next year.

The fresh round of consultations follow a missive from the Prime Minister’s Office asking the ministry to hold further consultations with the companies that will be affected.

This is the last leg of consultation with the stakeholders before the converged standards are notified, an official in the know of development told ET.

The directive from the prime minister’s office is in response to the ministry’s cabinet note on the Companies (Amendment) Bill, 2010.

It also calls for finalising taxation issues arising due to the convergence process in consultation with the department of revenue.

“In our view most of the 300 entities which have to implement the norms are almost ready,” said Amarjit Chopra, president, Institute of Chartered Accountants of India ICAI.

The Companies (Amendment) Bill is key to a smooth shift to the new standard as certain provisions in the present Companies Act of 1956 will have to be changed for the transition to take place.

The prime minister’s office also asked the ministry to examine the issues raised by the Public accounts committee chairman Murli Manohar Joshi in a letter to the prime minister, asking for delaying the new standards.

“We should focus our attention on ... the areas where Indian accounting standards differ with IFRS, so that by 2013 or by 2015, the stabilised IFRS can take into account the concerns of Indian accountants and Indian companies,” Mr Joshi said in the letter.

Countries such as US and Japan have already deferred IFRS implementation to 2015, the veteran parliamentarian wrote.
The government has already agreed to dilute many provisions of IFRS, particularly those relating to notional losses or profits arising out of market valuation of assets and liabilities.

The convergence requires preparedness not just at the level of companies that follow it, but also from the government in respect of regulatory policies.

Some of the regulations that are yet to be aligned for the convergence include taxation laws, existing Company law provisions. “There need to be specific provisions provided for under the tax code which would permit adjustments,” said Rajshree Sabnavis, partner corporate tax practices, BMR Advisors.