‘We will expedite the adoption of accounting standards in alignment with the
International Accounting Standards,’ said India’s prime minister, Manmohan
Singh, in a recent statement. With this, he cleared all doubt about his
government’s support for the adoption in
India of the new global
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However, besides many legal and practical problems hindering their adoption,
hostility to IAS among Indian chartered accountants continues to rage. The
overwhelming majority of Indian accountancy firms are
single-owner-proprietorships working as small units with little access to
The argument that through IFRS adoption, Indian industry will become more
competitive, eventually benefiting everybody, does not impress them and the new
standards are seen only as an evil that is going to hit their business.
A chartered accountant running a small firm in New Delhi told Accountancy
Age: ‘This is a very subtle game plan of the foreign (accounting) firms, which
are acting like big bullies. By advocating these new accounting norms, which are
only familiar to them, they want to hijack the Indian market.’
Joy Jain, executive director of PricewaterhouseCoopers in India, is in no way
defensive, however: ‘Those firms who do not perform will be out of the business.
And it is true that big firms like ours have more expertise and resources to
provide extra training required to adopt complex IFRS.’
India’s accounting board is fully empowered to adopt the new standards, with
the Indian parliament having no role to play unless there is a clash between
Indian law and the new international code.
In such a case, the law would have to be amended for an IFRS to be introduced
in India there are no such proposals before Indian MPs, although some could be
in the pipeline.
Despite these potential legal and administrative complexities, it is Indian
businessmen’s focus on their (short-term) profits that worries the accounting
firms most. To convince their clients to bear extra cost relating to IFRS in
the form of hiring more qualified accountants and maintaining extra sets of
accounts will be a daunting task.
Not just that, in addition to self-learning and training their staff, they
would also have to bear the hidden cost of training the client’s staff, which in
India is considered a duty of the firms.
Chairman of India’s Accounting Standards Board, SC Vasudeva, admits that the
required preparedness in India for the new standards is not present, but he is
eager to catch-up with the outside world. ‘With the adoption of standards
relating to the financial instruments, India will be almost level with European
The level of adoption in Europe could be a matter for debate, but problems in
India relating to the new standards exist. ‘Though the International Accounting
Standards Board is trying to impress upon us to adopt the IFRS fully, it is also
receptive to our difficulties regarding some of the IFRS norms that are in
conflict with Indian laws, and has asked us to provide a detailed report,’ says
One of the conflicts relates to India’s Companies Act that requires the gains
or losses on foreign currency exchanges, especially those relating to
acquisitions, to appear as an entry in assets. By contrast, under IFRS all such
variations have to be charged to revenues.
Also, IFRS goes against the rules issued by the Insurance Regulatory and
Development Authority of India on accounting for insurance contracts. All this
aside, it is the provisions relating to fair value that are the most
controversial aspect of IFRS in India.
Vasudeva explains: ‘Besides coming up with absolutely disruptive results in
many other areas, in agriculture it is totally useless as the agriculture
accounting in India itself is not yet developed.’
For the big companies that trade across borders, the adoption of new
standards will not matter. An Indian finance manager of a US multinational not
listed on the Indian stock market, says: ‘All our financial software generate
two sets of books, one based on US GAAP, and the other one as per the Indian
standards, just to complete the formality of submitting it to the local
Given the opposition to the new standards, the timeframe for the actual
switch-over stretches out into the future. ‘Given the slow overall process in
India, it will take ‘five to 10 years’, says Jain.
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