Ind-As: Will it become a reality or get deferred?

1. Introduction of Revised Schedule VI has pushed the look and feel of financial statements closer to Ind-AS/IFRS. The classification of assets and liabilities into current and non-current was feared to impact the way banks viewed the ratios and covenants, but the reactions haven’t been that sharp.

2. The recently issued Schedule II to the Companies Act, 2013 on depreciation and its emphasis on useful life, conspicuous absence of written down value rates, introduction of the new concept of ‘Component’isation of fixed assets, surely created ripples and hectic efforts in the Q1 of 2014-15, but has also brought us closer to the concepts in IFRS.

3. Many companies in India are already using the principles of derivative and hedge accounting from Accounting Standards 30, which is almost a replica of IAS 39 – Financial Instruments Measurement, its equivalent standard in IFRS. In fact, many companies have even implemented the next level of sophistication by designating ‘net investment’ hedges using non-derivatives etc. This is by far one of the most sophisticated and technical sections of IFRS, so we are already familiar now!

4. SEBI has stated that in consultation with the Financial Reporting Review Board, a review committee of ICAI can force companies to restate their financial statements, in certain situations. The Companies Act 2013 also provides for such restatement in certain cases. Thus, the unthinkable, ‘restatement’ of previously issued financial statements is a reality and closer to IFRS!

5. The Companies Act 2013 has made it mandatory for preparation of consolidated financial statements for all companies whether or not they have a subsidiary. More significantly, if one takes a close look at the definition of ‘control’ under the Companies Act, 2013, the SEBI and FDI, it would bear very close resemblance with the definition under IFRS. While the definition in the current accounting standards continues to focus on more than 50% voting rights and/or majority representation on the board of directors, I think there is already a sense in the profession that the definition needs to be aligned, another step towards IFRS, if I may say.

In the years leading up to the date of implementation of Ind-AS in 2011, the presentation of financial statements and the depreciation were considered to be heavy lift items requiring lot of efforts. Both of these are out of way. It is also important is to realise that these have had impact on all companies and not restricted to companies with a net worth exceeding Rs. 500 crore.

The introduction of Tax Accounting Standards, which is in the offing, is another way of taking the tax impact of transitioning to IFRS out of equation.

This by no means is an attempt to state that there are no open items, infact there are quite a few important clarifications which are eagerly awaited. However, one thing is for certain, in terms of Ind-AS becoming a reality, the zor ka jhatka is already being introduced dheere se!

(The author is Partner - Price Waterhouse & Co. Views expressed are personal)