The guideline for India Inc on International Financial Reporting Standards (IFRS), which got delayed from its expected November first week release, is now expected to be out within a week.
Sources noted the two appointed sub-groups have submitted their reports and a consolidated one combining views of both is now being worked upon.
?The guidelines on IFRS have got delayed but should be out any time now. The committee is looking at its phased implementation. Large listed companies, with a particular net worth, which is being decided, will be asked to adhere to IFRS standards in the first year. The names of companies are getting chalked out,? said the source. The companies are being scrutinised on various financial parameters, like their borrowing limits, net worth, valuation and balance sheet size.
Accordingly, mid-sized companies will be taken up in the second tranche, in 2012, following their larger peers, while relatively smaller companies like SMEs will be focused in the third phase.
Essentially, all listed companies, where public funds are invested, will be required to prepare and present financial statements using the accounting principles and methods stipulated in IFRS, starting from the accounting period on or after April 1, 2011.
While companies are getting geared up, experts say companies they consulted with feel the initial transition would be a major challenge for them.
?Initial transition would be a major challenge, as recognition and criteria for assets and liabilities differ between IGAAP and IFRS. Their recognition or derecognition under IFRS, as well as their measurement under IFRS principles, would have an impact on initial earnings, and the need to put in place information systems to catch these differences would be vital,? noted Aziz Tayyebi, financial reporting officer with the Association of Chartered Certified Accountants (ACCA).
ACCA, which had a discussion with various companies, figured out the industry feel that their business combinations and financial instruments are the other areas that could be a problem early on, with other differences likely to occur in income taxes, employee benefits and revenue recognition.
In August 2009, it was decided that the new standards would be examined by two sub-groups within the core groups. The first sub-group, headed by YH Malegam, will identify changes required in various laws and accounting standards for convergence with IFRS and to prepare a clear road map for achieving the same. The second sub-group of CFOs under the chairmanship of Mohandas Pai would interact with stakeholders to understand the issue of convergence with IFRS identify problem areas and ascertain the preparedness of the stakeholders for such convergence.
