The Ministry of Corporate Affairs (MCA) rang in the New Year by announcing the roadmap for implementation of Indian Accounting Standards (Ind AS). The new accounting framework is closely aligned with the International Financial Reporting Standards (IFRS), as issued by International Accounting Standards Board (IASB). This is aimed at converging India’s accounting standards with the globally accepted framework. This move by the MCA echoes the Finance Minister Arun Jaitley’s budget speech in July 2014, in which he stressed the urgent need to converge the current Indian accounting standards with IFRS.
Though the adoption of Ind AS could create certain complexities, in the long run, this major regulatory reform will help them catapult into the global league by having a financial reporting structure that is not only comparable with the best in the world but also more acceptable amongst global stakeholders thereby providing a more transparent view of their financial results.
Grant Thornton Survey
To gauge the level of preparedness about new accounting system among Indian businesses, Grant Thornton recently conducted a pan-India survey. This survey was aimed at identifying the key challenges that companies were expecting to encounter upon Ind AS implementation.
The survey, conducted among businesses from across sectors, sought response to three key questions:
- How does the industry perceive Ind AS as the new accounting mandate?
- What are the key challenges with respect to the changes proposed to be brought by Ind AS?
- How prepared is the industry to deal with the changes proposed to be brought by Ind AS?
We received an overwhelming response to the survey. While a detailed analysis of the responses is discussed below, the survey revealed the following:
- Adoption of Ind AS is perceived to enhance the credibility and comparability of financial statements of Indian companies with their global peers and provide easier access to capital
- Level of awareness of accounting teams about Ind AS is fairly low, though there is a desire to upgrade the knowledge in a short span of time, and
- Plans for transition are not yet in place and the companies have not fully evaluated the impact of Ind AS on their financial statements and organisations as a whole (human resources and IT in particular)
Overall, these survey results show that as the MCA and the Institute of Chartered Accountants of India (ICAI) swiftly worked towards drafting the new accounting framework, this ‘mandate’ is perceived as a step in the right direction and the industry is taking steps to keep pace with this landmark development.