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Companies with a net-worth of Rs 500 crore or more will have to follow the new Indian Accounting Standards (Ind AS) from April 1 even as experts have raised concerns that many firms are not prepared yet.
The new standards are benchmarked to the International Financial Reporting Standards ( IFRS). The shift will make Indian corporate accounts comparable internationally, filling the gaps in reporting standards that India follows currently.
This will lead companies to make wider disclosures on transactions and associated companies as well as provide explanations on various numbers in their books.
According to the corporate affairs ministry's roadmap, all companies, listed or unlisted, that have a net-worth of over Rs 500 crore along with their holding, subsidiary, joint venture and associate companies would be covered in the first phase.
Companies with a networth of over Rs 250 crore and up to Rs 500 crore will come under the rules from April 2017 and the net-worth will be calculated as of March 31, 2014.
A recent PwC Ind AS Outlook survey said more than half of corporate India is yet to plan or commence implementing changes at an organizational level and over a third is yet to start or plan for the impact assessment of Ind AS adoption.
"To me these statistics appear alarming considering the imminent adoption. Financial services, infrastructure, retail and pharma sectors are most susceptible to changes," said Sumit Seth, partner at PwC.
The rules will impact the way financial assets and liabilities are classified and many items that were off the balance sheet will have to be reported.
"There are several implementation challenges such as understanding and interpretation of Ind AS financial statements by stakeholders. An enhanced degree of sophisticated judgment will be required for quantifying the impact on financial statements," said Siddharth Talwar, partner at Grant Thornton.
This article was published in the Economic Times, to read please click here.