The industry that is most affected by the adoption of IFRS in India is the banking industry. Ernst & Young conducted a survey across the banking industry on IFRS. We cover key features of the survey in this space.
The majority of the banks surveyed perceive the IFRS (IND-AS) convergence process as a moderate-to-high priority project, with primary drivers being the pervasive impact of the standards as well as complexities associated in a pan-organization implementation.
In India, banking is heavily regulated and the generally accepted accounting principles as issued by the ICAI for companies are superseded in a number of key areas (for example investments) by accounting principles and prudential norms issued by the sector regulator, viz., the Reserve Bank of India (RBI).
The conversion challenge for the sector is compounded since the main standard of concern, IAS39, is being replaced with a new standard, IFRS9, in three phases:
- Recognition and measurement
- Hedge accounting
This was one of the primary reasons cited by the RBI in obtaining an extended roadmap of 2013 for the sector.
Keeping in mind complexities associated with the IFRS standards, particularly in light of requirements peculiar to India, the assessment of the impact on the banking sector prior to implementation was included as an item within the 2010–11 RBI Annual Policy statement.
As a result, the RBI has formed a working group to understand IFRS implications for the sector although no official guidelines have been issued as of yet.
Ernst & Young has conducted a survey across the banking industry on IFRS. The objective of this survey is to get a perspective of the key IFRS implementation challenges and issues as perceived by the banking sector.
The survey also seeks to channelize the feedback received into the various policy making initiatives that are currently in progress.
We are pleased to bring to you the results of the feedback received from 20 banks we had reached out to representing almost 60% of the banking sector (by asset size). The coverage is well spread across the banking spectrum of the public sector (seven banks), private sector (seven banks) and foreign banks (six banks).
The key questions covered in our survey were:
- Apart from the statutory requirement what level of benefit do you perceive for your organization in implementing IFRS?
- How high a priority as a project do you perceive the convergence to IFRS (INDAS) to be for your organization?
- Will you be presenting comparatives, which would require a 1 April 2012 transition date?
- How would you rate the difficulty of conversion to IFRS (IND-AS) in specific areas on a scale of 1 to 5 (5 being the most difficult)?
- What is your preparedness for reporting under IFRS-converged standards (IND-AS) in India?
- Do you think your bank has skilled resources for converging to IFRS (IND-AS)?
- How do you intend to run the IFRS convergence (IND-AS) project at your bank?
- To what extent do you think your IT systems will require modification for your bank to move to IND-AS?
- Outside of the financial reporting function, what level of awareness on IFRS (IND-AS) would you perceive exists across your organization?
- According to you, which of the following represents the most significant hurdle to converge to IFRS (IND-AS)?
- As IFRS is principles-based, what kind of regulatory direction on accounting would you prefer upon convergence in India?
To get the survey responses and our analysis in details, download this report .