India recently came out with a road map for companies to implement the new Indian accounting standards (Ind-AS). Howard Rosen, Worldwide Chairman, BKR International, one of the top 10 global accounting associations, tells Deepak Patel that changes in accounting standards world over would create confusion unless the US comes on board and accepts International Financial Reporting Standards (IFRS). Edited excerpts:
The government has laid out a road map for new Indian Accounting Standards (Ind-AS). In the road map, the government has put unlisted as well as listed companies in the purview of the Ind- AS. Do you think this is fair?
No, the investors in unlisted companies are promoters as well. So, they have a much better understanding of what goes on in the company on a day-to-day basis as compared to the public entity where the investors may have no contact whatsoever with the firm. In case of unlisted companies, the new standards offer no benefits to the investors.
What is your take on new accounting standards in India in general?
Not only in India but throughout the world the accounting standards are changing from what we used to call as General Accepted Accounting Principle (GAAP) to International Financial Reporting Standards (IFRS). It has really thrown the world into a tizzy because the United States has not accepted it. So we have a situation where a major financial power is not accepting it and on the other hand the rest of the world is converging to IFRS. I assume that the problem will be for investors who will be asking how do I compare companies?
So from an accountant's perspective, it is very confusing as we do not know what our clients need from us. For some of the larger firms - which are doing business in both the countries - the accountants will need to know both set of standards. For some of us, who have been practicing for a long time, we need to change our mindset and it is going to take some time as well. There are already many courses and seminars out there to help us make this transition but I think that there will be a lot of confusion until we have the United States on board.
The US market regulator-- Securities and Exchange Commission (SEC)-- raised some serious objections to IFRS implementation in its report in 2011. One of its primary objections was that retail investors will find it difficult to read balance sheets. Do you think that United States will change its mind now?
I don't think that the United States will change its mind. There is so much concentration of major world companies in the US and they do not have any reason or incentive to change. Unless and until there is an absolute reason that it has to happen, you won't see anybody - SEC, US's accounting institute, companies - championing it or pushing it forward in the US.