KPMG comment on IFRS

The timelines for financial services sector, including banks and insurance companies is also expected to be finalized soon

July 10, 2014 5:40 IST | India Infoline News Service
Sai Venkateshwaran – Partner and Head - Accounting Advisory Services at KPMG in India says “The finance minister’s announcement to introduce new accounting standards converged with IFRS is a very welcome.  It is expected that companies would be permitted to voluntarily follow the new standards from 2015-16, which become mandatory from 2016-17.  The timelines for financial services sector, including banks and insurance companies is also expected to be finalized soon.  The tax accounting standards are also expected to be notified in due course.
This comes at a time when the capital market activity is picking up, both in India and globally, and this certainly comes as a boost to further strengthen our capital markets.
Learning from the past efforts at convergence in 2011, the government should finalize the roadmap for implementation immediately.  This roadmap should consider implementation in a phased manner, taking into account the various challenges involved in the implementation, including sectoral issues, as well as wider issues around capacity building, etc.  The roadmap for financial services sector, in particular banks and insurance companies would need to also keep in mind the IASB’s timelines for implementation of its new standard for financial instruments, IFRS 9, which after a couple of deferments is now expected to be applicable from 2017.”
Jamil Khatri – Global Head- Accounting Advisory Services, KPMG in India “Further, considering that the Ind-AS standards published by the MCA in 2011 are outdated due to several change in the corresponding IFRS standards, the MCA and NACAS should also update and issue the new set of standards that will be implemented.  The MCA should keep the carve-outs to the bare minimum when finalizing these standards to ensure that there is global acceptability for financial statements prepared using these standards when they are issued.
The issue of tax accounting standards would also address one of the big implementation challenges that was faced by corporates, which resulted in significant push back to the earlier convergence effort.  This would now pave way for taxable income being delinked from accounting income as both will be prepared under separately defined frameworks.
On the whole, the announcement is a continuation of the new government’s thrust towards aligning governance in India with international norms.  By moving forward with the implementation, India can play a significant role in accounting standard setting globally.  While preparing the detailed implementation plan, the pitfalls that resulted in unsuccessful implementation of Ind AS in 2011 should be avoided and proactively addressed.”

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