By Saloni Madhok, Marketing Manager at Zuora
We delve into the newly converged revenue recognition guidelines as it relates to the country of India. Following today’s introduction, we will feature upcoming items on the impact to the country’s automobile industry and the dilemma of timing.
The country’s Ministry of Corporate Affairs (MCA) along with other government departments issued a road map for implementation of Indian Accounting Standards (IndAS) converged with International Financial Reporting Standards (IFRS). This proposed convergence will be conducted in various phases for first-time adoption in India.
In order to achieve convergence, there will be two separate sets of accounting standards:
- The first set would compromise of the IFRS-converged accounting standards (Ind AS)
- The second set would contain existing Indian accounting standards
The proposed IFRS-converged accounting standards would be applicable for preparation of consolidated financial statements of the specified class of companies, which includes: listed companies, unlisted companies having a net worth of 500 Crore INR or more and holding, subsidiary, joint venture or associate companies of companies mentioned before.
IFRS Roadmap Overview
The MCA roadmap has provided specific dates for adoption of IFRS in India on the basis of a company’s net worth as indicated by the exchange on which they are traded. The IFRS conversion roadmap for banks and insurance companies will follow separately, according to this EY publication.
- Phase 1 companies are required to start reporting IFRS results from the first quarter of the year, beginning April 1, 2011. Also, depending on how a company elects to present comparative information in the first year, the actual date of transition could be as early as April 1, 2010.
- The core group and its sub-group 1, constituted by the MCA for IFRS convergence, shall determine IFRS conversion roadmap for banking and insurance companies separately by February 28, 2010.
- Non-listed companies with a net worth of less than INR 500 crore and other small and medium-sized companies (SMCs) have been given an option to continue following non converged standards (hereinafter referred to as “Indian GAAP”) or to adopt IFRS.
- The draft of the Companies (Amendments) Bill, proposing for changes to the Companies Act, 1956, will be prepared by February 2010.
- The Institute of Chartered Accountants of India (ICAI) has submitted to the MCA revised Schedule VI to the Companies Act, 1956. The NACAS shall review the draft and submit a revised Schedule VI to the MCA by January 31, 2010. Amendments to Schedule XIV will also be carried out in a time sensitive manner.
- Convergence of all the accounting standards with IFRS will be completed by the ICAI by March 31, 2010, and the NACAS will submit its final recommendations to MCA by April 30, 2010.
Stay tuned for more updates and guidance for adoption of Indian Accounting Standards converged with International Financial Reporting Standards for various industries in India!