Companies should use the additional time to prepare fully for Ind AS and update finance systems.
India's commitment to convergence with International Financial Reporting Standards ("IFRS") moved a step closer with the publication of 35 Indian IFRS standards ("Ind AS") by the Ministry for Corporate Affairs (MCA) in late February 2011. However, Ind AS are different from IFRS in several important areas.
All companies are likely to be affected by changes in respect of first-time adoption and presentation: a high level summary to Ind AS can be found here. A detailed guide to Ind AS is forthcoming.
It will take some time for companies to analyze these changes.
Furthermore, the respective bodies need to decide whether interpretations on leasing and infrastructure would be ultimately included in Ind AS, and how companies reporting under Ind AS will be taxed. Therefore it seems likely that the MCA Roadmap published in January 2010 would be replaced with a new timeline.
Companies can use the additional time to embed Ind AS fully in their systems, train finance teams in the new standards, and prepare fully for the change to ensure a full transition. Companies may also like to consider converting the finance systems fully to IASB IFRS so that, if required, financial information can be presented under both IASB IFRS and Ind AS.
Areas such as revenue recognition, financial instruments and fixed asset accounting will present practical challenges for companies making the change to Ind AS.
Conversion to Ind AS or IFRS entails more than merely changing accounting policies, and companies will need to carefully assess the readiness of their financial reporting systems and the potential business impact before making the change.
First step: IFRS/Ind AS diagnostic
The starting point of the journey is to conduct an IFRS/Ind AS diagnostic to assess the impact that conversion will have on your business.
For more on how EY can help you prepare to report under IFRS/Ind AS, contact us.