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April 30, 2008

Indian firms prepare for IFRS convergence

While the majority of the world has largely embraced International Financial Reporting Standards (IFRS), India’s journey to convergence is causing teething problems.

The Institute of Chartered Accountants of India, a statutory body that regulates the profession in India and sets accounting standards, has opted to converge with IFRS issued by the International Accounting Standards Board from 1 April 2011.

This deadline will apply initially to all listed entities, including all firms. Other public entities such as banks are expected to be subject to mandatory IFRS following confirmation from other Indian regulatory bodies and the national government.

RSM India managing partner Suresh Surana said convergence to the global standards will not be a completely alien task as the firm can leverage on the resources of RSM International to familiarise staff with IFRS. He added that, although RSM has worked on many IFRS assignments, the firm still has a long way to go to be ready for convergence.

Costly exercise

Surana explained the firm is already training staff. “We have been sending staff to our international counterparts’ RSM workshops, but this is becoming expensive because people have to travel outside of India,” he said. “On top of that there is also accommodation fees, so it can cost anywhere between $3,000 and $4,000 [per person]. There are courses available in India and these cost $500 to $700 for a week or two weeks, but then you need to apply that in practice.”

PS Kumar, a partner at Morison International member firm Brahmayya & Co, said he expects few problems moving to IFRS. He explained that the firm prepares the financial reports of some clients using Indian GAAP and then translates them into IFRS for international investors.

He added: “Within IFRS there are a few complicated standards, for example stock options are fairly complicated. We do not have those issues right now, what we have are simple plain conversion issues. So that may be a little more difficulty, but eventually we will have to get used to it.”

Melanie White

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