The government has put on hold the implementation of IFRS accounting norms for banks in India. International Financial Reporting Standards (IFRS) were scheduled to be implemented from the next fiscal.
“They (IFRS) are on hold because the ministry of corporate affairs and the Reserve Bank of India also feel so. Besides, globally, too, they are on hold for banks,” DK Mittal, former secretary, Department of Financial Services said. Mittal had demitted office on Thursday.
The ministry of corporate affairs had earlier announced that banks in India will transition to IFRS-converged Indian accounting standards (Ind AS) with effect from April 1, 2013 — a deadline that has been extended repeatedly. Adoption of new accounting standards has been put on hold following similar developments in global accounting policies.
The International Accounting Standards Board (IASB), which proposed the timing of implementation for IFRS, has deferred the mandatory date of its new financial instruments standard from 2013 to 2015. It issued an exposure draft in November 2012, proposing limited modifications to the previously finalised portion of IFRS 9, which pertains to the classification and measurement of financial assets.
Also, the US Financial Accounting Standards Board (FASB) has recently decided to explore a revised approach to its loan loss provisioning model, which could be in variance with the IASB’s approach. International developments, too, have slowed the government’s move to converge norms for Indian banks and financial institutions with IFRS.
The new standard was to significantly alter the way banks report their financial numbers. IFRS norms also call for better disclosures, resulting in heavier annual reports and greater need for accounting professionals. IFRS guidelines would give a little more flexibility to banks while reporting their accounts.
The implementation of IFRS norms is most complicated for the banking sector, especially in areas such as recognition and measurement of investment, asset impairment and hedge accounting. In the Indian banking sector, the generally accepted accounting principles issued by the ICAI are typically superseded in key areas — such as investments — by accounting principles and prudential norms issued by the RBI.