Survey reveals few companies ready for new accounting standards

Businesses can switch to globally compliant Indian Accounting Standard voluntarily from April 1

Only 22 per cent of the companies surveyed by Grant Thornton have an operation plan in place for transition to globally-compliant Indian Accounting Standard (Ind-AS).

Last Friday, the government had said companies might  choose to voluntarily adopt Ind-AS — with the base year 2014-15 — from April 1 this year. However, companies which are listed or are being listed — and have a net worth of more than Rs 500 crore — will have to adopt these accounting standards from April 1 next year.

Listed companies with net worth less than Rs 500 crore and unlisted companies with a net worth between Rs 250-500 crore, will have to follow these norms from April 1, 2017.

GOVT NORM

• On Friday, the govt had said companies might choose to voluntarily adopt Ind-AS with the base year 2014-15 from April 1 this year
• Companies which are listed or are being listed — and have a net worth of more than Rs 500 crore — will have to adopt these accounting standards from April 1 next year
• This will not be applicable to banking companies, insurance companies and non-banking finance companies

This road map will not be applicable to banking companies, insurance companies and non-banking finance companies.

According to the Grant Thornton survey, though, a whopping 65 per cent of the respondents strongly believe Ind-AS will open up avenues for accessing capital in international markets, a majority of them do not consider voluntary adoption a feasible option with only 36 per cent of the respondents expressing their intent to do so. The survey covered 94 key officials of 89 companies. Even less number of respondents (13 per cent) have initiated the assessment process.

Out of the above 22 per cent who do have a plan for switching to Ind-AS, only 38 per cent have considered apprising the Investor Relations team about the possible challenges and impacts.

The survey revealed that 55 per cent of the respondents have only a basic-level of understanding of Ind-AS and a vast majority (68 per cent) will either loop in external experts to meet the desired objectives or have not yet evaluated in-house expertise.

“On a broader note, the responses demonstrate a clear absence of active planning on part of most of the corporates in preparing for this change,” the survey said.

Almost 84 per cent of the respondents found the cost of transition and compliance with Ind-AS sizeable. Ironically, only 14 per cent of the respondents have factored in such costs in their budgets.

A majority of the respondents (52 per cent) considered lack of knowledge of their financial reporting staff as a significant bottleneck in implementation of the new accounting standards.

Even with all the unpreparedness of the companies and professionals, 65 per cent of the respondents believe Ind-AS will provide better access to capital markets and investor community. Additionally, 59 per cent believe that Ind-AS will provide fairer view of financial position of their company.

“The good news is that many professionals are willing to sharpen their knowledge and upgrade their skills on the new accounting standards in a short span of time and companies are gearing up to conduct an impact analysis in a very near term,” said Nabeel Ahmed, partner, Grant Thornton India LLP.