The corporate affairs ministry and the Institute of Chartered Accountants of India (ICAI) are confident of meeting the April 2011 deadline to shift to International Financial Reporting Standards (IFRS).
But industry says a complete transition from Indian Generally Accepted Accounting Principles (GAAP) to IFRS may take time.
Auditing professionals say unless amendments are made to the Companies Act, the Reserve Bank of India Act/Banking Regulation Act, and Securities and Exchange Board of India and Insurance Regulatory and Development Authority rules, companies will find it legally difficult to shift to a new accounting system.
For, each rule specifies the accounting practices the companies are to follow. For the IFRS system to be legal, changes are required to be made in the existing rules, they say.
"For IFRS to be followed from April 2011, companies will have to prepare the comparable accounts for the year ending March 2010 in the new format. This may be possible for bigger companies but is a big challenge for smaller ones," said R Shankaraiah, chief financial officer of Jubilant Organosys.
The government, however, is confident of meeting the challenge. "The core group that is looking into the convergence issues has representives from all the institutions that require amendments in rules so that synchronisation problems do not arise," said R Bandopadhayay, secretary, corporate affairs ministry. "The ministry will take care of the changes in legislation. It is industry's preparedness that matters more."
Jamil Khatri, executive director, accounting advisory services, KPMG, said there was truth in both arguments. "It's both yes and no. Several changes can be made and new standards/interpretations operationalised without changing the above regulations. However, full convergence cannot happen until specific regulatory amendments are made to eliminate conflicts between specific standards and regulations," he says.
KPMG has launched IFRS Institute, a web-based platform, to help stakeholders in the transition.
Not all companies are likely to be asked to shift to the new standards by April 2011. The ICAI has already proposed a list of over 400 companies that should be brought under the new system in the first phase.
It includes top listed companies that comprise benchmark stock indices Sensex and Nifty and companies that have raised over $50 million debt abroad. Financial sector companies and Indian subsidiaries of foreign companies that are already IFRS-complaint abroad are also in the list.
"We are working together (with other government agencies) and the convergence should happen. The ICAI is actively conducting training and certification programmes across the country. We have over 4,000 chartered accountants who are trained in the new accounting system," said Uttam Prakash Agarwal, president, ICAI.
Agarwal said the institute was in touch with the International Accounting Standards Board to reduce the glitches during the initial year.
According to Khatri, the core group formed by the government has made significant progress. "Technically, governments have time till April 1, 2011, to make the enabling amendments and hence 16 months are still left to make the changes. Having said that, the sooner the amendments are made, the smoother will be the path to convergence," he said.
