The Institute of Chartered Accountants of India (ICAI) is planning to issue eight new Accounting Standards (AS) in the next two years, over and above the existing 32.
The move by the institute, which besides regulating the profession of chartered accountancy also sets national standards, is aimed at adoption of International Financial Reporting Standards (IFRS) — which will become mandatory by 2011. But there are concerns that the institute’s members, numbering more than 150,000, are not being prepared adequately to learn and use these new standards.
The new standards are being introduced to improve financial reporting at a time new financial instruments and new businesses with different income and expenditure patterns are emerging.
Broadly, IFRS has 40-50 accounting standards and India has already released 32, some of which are new and some modifications of the earlier ones.
“It is necessary for chartered accountants (CAs) to get acquainted with IFRS and hence the need for new standards,” said Uttam Prakash Agarwal, president, ICAI. “Our members are fully prepared for IFRS,” he added.
The ICAI established the accounting standards board in 1977. In 1988, the Companies Act recognised its standards by making compliance mandatory for all companies.
Too much in too short a time?
However, there’s a section of CAs which feels that these standards are being issued at a fast pace and most of them are neither aware nor equipped to adopt these. Besides, there are new standards for local bodies (issued last year) as well as modifications and interpretations of the existing ones, which makes CAs feel there’s an overload of information.
“Convergence to IFRS is understandable but the institute should go slow in issuing these standards,” said a senior CA and a member of the institute who declined to be identified. CAs don’t even read these standards and so far no comprehensive survey has been done to evaluate preparedness, he says.
R Bupathy, a former president of ICAI, agreed and said there was an overdose of standards. “It’s a matter of concern that many CAs are not even aware of these standards, but if we don’t implement these, it will become a more serious issue when the entire world becomes IFRS-compliant,” he said.
It is not that CAs are not given enough time to learn and adopt these standards. According to Agarwal, they hold classes on IFRS and a certificate course on IFRS for the institute’s members. They are educated through the institute’s journals, website, seminars, etc, and before making any standard compulsory, the institute seeks comments from its member CAs, he says. Ved Jain, past president of ICAI, said these standards were at first recommendary and there was usually a two-year time-frame before these were made mandatory. This, he said, gave CAs ample time to gear up.
There’s also a 20-hour mandatory training for CAs, says Jain, who was the president of the institute in 2008-09. Three accounting standards — AS 30, AS 31 and AS32 — were issued during his tenure. These would become recommendatory from April 1, 2009, and mandatory from April 1, 2011.
Bupathy said if CAs did not attend these classes, no action could be taken against them.
“People are being lazy”, said Jamil Khatri, head of accounting advisory services, of global consulting firm KPMG in India. “These standards have been due for a long time and CAs should understand that the world has changed and they need to reskill themselves”, he said.
India’s readiness to convert to IFRS
In fact, India was far away from adopting IFRS though ICAI had announced its plan to move to the new global standards by 2011 in August 2007, said Khatri. He added ICAI also needed to catch up because there were still four-five important accounting standards like stock options that it was yet to bring out.
Disagreeing, Agarwal said the institute was fully geared up to spread awareness.
By 2011, about 150 countries would have adopted IFRS. However, the US plans to move to IFRS by 2014.
