 "Hans Hoogervorst")
International Accounting Standards Board (IASB) is the independent standard-setting body of the IFRS Foundation, a not-for-profit organisation that works to develop a globally accepted financial reporting standard. IASB Chairman Hans Hoogervorst shares with Sudipto Dey his assessment of how the new accounting standards would impact Indian businesses. Edited excerpts:
Indian Accounting Standard (IND-AS) is a step closer to being IFRS compliant. To what extent would this improve the competitiveness of Indian businesses globally?
IFRS is recognised by investors globally. Typically, they won't have the time to figure out the differences between country-specific standards. When companies report using IFRS, investors know what they get, and this creates trust.
While IND-AS is not the same as IFRS, it will bring the accounting standards in India much closer to the international standards that investors know and have confidence in. It should raise the standard of reporting in India and that, in turn, should improve the appeal of Indian companies to foreign investors. However, companies will only experience the full benefit when India becomes fully compliant with IFRS.
Does it make India a more attractive market for foreign capital?
We know from research in other markets that IFRS reporting has brought many benefits. Among them is improved access to capital - at a lower cost - from the international investor community. Transparent reporting is a precursor for attracting foreign capital. Taking a step towards IFRS should help increase the appeal of Indian companies to investors.
Any dos and dont's for Indian companies while embarking on this journey to be IFRS-ready?
It is critical that they invest time in understanding the new requirements, and create an implementation plan. There may be needs for system changes, new ways of gathering data, and general training needs. It is also important that contracts are considered, in case changes in accounting affect the contract clauses.
Accounting changes at this level is not something that can just be left to the finance department to deal with. It requires involvement at many levels throughout the organisation concerned. Discussions with peers, sharing experiences and lessons learnt can be of great help when determining how best to tackle the changes required. It is very important that companies engage with their stakeholders and keep them informed about what changes they are anticipating so there are no surprises.
Do you think the Indian government should give the option to companies to be fully IFRS compliant if they desire so?
It is, of course, up to the Indian authorities to set out the appropriate course of action for the Indian capital markets. However, some Indian companies already report using full IFRS. They would benefit from being allowed to continue doing so. At a time when India is making good progress towards IFRS reporting, removing the option of full IFRS could send confusing signals.
For multinational companies, it is especially advantageous to be able to use the same accounting standards in all the markets they operate in. It saves preparation costs, and also means the skills required across the company are more uniform, streamlining training.
