The Indian government plans to amend the Companies Act this budget session to enable aligning Indian accounting standards with the International Financial Reporting Standards (IFRS). New Delhi hopes to migrate to an internationally accepted accounting standard by April 2011.
Recently, a core committee of the Government of India finalised the roadmap towards India’s adoption of IFRS. An official statement issued by the core committee states that Small and Medium Enterprises will not have to prepare for the first phase of the IFRS effective from April 2011.
Aimed to save India’s huge and growing SME sector from expensive compliance costs, including an overhaul of operational and IT processes apart from training costs, the core committee ruled that only companies with an investment in plant and machinery of more than Rs 25,00,000 but less than Rs 50 million are exempt from IFRS compliance in the first phase.
“The SME sector, which contributes significantly to the Indian economy, will continue to follow existing Indian accounting standards , which may be modified from time to time to make the sector more competent in the international arena,” Uttam Prakash Agarwal , president, Institute of Chartered Accountants of India (ICAI), told the Economic Times.
IFRS will be effective in India from April 2011 for medium and large enterprises where investment in plant and machinery is more than Rs 50 million but does not exceed Rs 100 million. The list also includes all NSE and BSE listed companies, entities having foreign borrowings of more than Rs 5000 million, insurance click entities , mutual funds, venture capital funds and all scheduled banks having operations outside India.
Brought about to harmonise accounting norms internationally, the IFRS is already implemented in Australia, the European Union, Turkey, Hong Kong and Singapore. The U.S and China which have their own accounting norms, similar to the IFRS are considering aligning themselves to the IFRS. The IFRS will be effective from 2011 in India, Japan, Canada and Russia.
