The net worth of 55 of BSE top 100 companies rose by Rs 1,34,400 crore following the transition to Indian Accounting Standards (Ind AS), says a report by business consulting firm EY. However, 17 firm witnessed a decline of Rs 35,000 crore in their net worth after the transition, the report said. EY performed a review of financial results of BSE top 100 companies that were covered in phase 1 of the transition to Ind AS as per the roadmap issued by the Ministry of Corporate Affairs. According to the report titled ‘Ind AS Transition: Journey of Indian Corporates’, 39 companies reported Rs 5,200 crore increase in profit, while 35 companies saw Rs 40,900 crore fall in their net earnings.
“One of the primary reason for the increase in net-worth was the deemed costs option as adopted by some of the companies in transition. This enabled them to fair value the investments in subsidiaries as well as fair value the property, plant and equipment (PPE),” the report said. Additionally many companies had to account for fair value changes in their investments in equity shares and certain derivative instruments which has resulted in significant upside to the net-worth on transition, it added. “The regulators and all stakeholders need to put together a robust system to monitor the quality of financial reporting and at the same time come out with new standards to align with ongoing accounting change under International Financial Reporting Standards (IFRS),” Sandip Khetan, Partner in an Indian member firm of EY Global said. The report further noted that overall, all the companies were able to file the Ind AS financials on time, indicating that the transition was well planned and executed.