Implementation of Indian Accounting Standards (Ind-AS) will improve the country's global standing on corporate governance and send out positive signals to investors, say experts.
The Corporate Affairs Ministry has notified the rules for Ind-AS - accounting norms that are converged with global standards - and would be compulsory for companies from April 1, 2016. Ind AS can be followed by corporates on a voluntary basis from April 1 this year.
Head of Accounting Advisory Services at KPMG in India, Sai Venkateshwaran said the notification fills up significant gaps that exist in the current accounting guidance.
"This will, in turn, improve India's place in global rankings on corporate governance and transparency in financial reporting," he said.
For companies having networth of Rs 500 crore or more, it would be mandatory from April 1, 2016.
Ashish Gupta, Partner at Walker Chandiok & Co LLP, said the Ind AS notification would "certainly resonate positively with the investor community at large".
Sudhir Soni, Partner with an India member firm of EY Global said the Ind AS notification is a welcome move and demonstrates the government's commitment to align with best practices in international financial reporting.
"There are numerous benefits stemming from Ind-AS for India Inc. These will send out the right signal about corporate India's move towards greater transparency and will further strengthen the country's ability to attract foreign capital," he noted.
Noting that corporates would now have to do their part, experts opined that Ind AS is not just an accounting change but something that would impact on how business is done.
"Currently 39 Ind ASs have been notified, including the most significant ones being Revenue Recognition and Financial Instruments," said Sumit Seth, Partner and IFRS Leader at Price Waterhouse.
"These two standards on its own will have an enormous effect on entities- it will not only impact every company's top line and therefore bottom line but will require other organisational and business changes," he added.
Venkateshwaran noted that since there are certain carve- outs or deviations from IFRS, these standards would not be considered as equivalent to IFRS.
"Companies on their part should endeavour to minimise the use of carve-outs, so that their financial reports are as close to or the same as it would be under IFRS," he added.
