As companies prepare to migrate to the International Financial Reporting Standards (IFRS) regime from next year, it now appears that India would initially adopt a watered-down version of the same, giving sufficient time for companies to migrate and adopt the stringent global accounting standards.
The move is expected to provide a breather to India Inc as the new accounting system would mean implementation of a methodology, which is different from the current practice involving calculation of revenue and expenditure among other things.
This may, in turn, impact the profit levels of companies, a source familiar with the development told HT.
IFRS standards are based on the principle that a financial statement should reflect the true and fair view of the business affairs of the organisation. As these statements are used by various constituents of the society and regulators, they need to paint a true picture of the organisation’s financial position.
The IFRS is different from the Generally Accepted Accounting Practices (GAAP) followed by Indian companies. For instance, at present, the Indian accounting system does not yet have any definitive standard for derivatives. In the IFRS, derivatives and hedge instruments will be measured at fair value.
The Ministry of Corporate Affairs had issued a roadmap for transition to the IFRS. The implementation was to be done in a phased manner.
In the first phase, Sensex and Nifty companies, whose securities are listed on stock exchanges outside India and those with net worth of R1,000 crore were to switch to the new accounting system.