By Saloni Madhok, Marketing Manager at Zuora
Companies across the globe are gearing up for the landscape-shifting alterations to accounting standards, and India is on the clock.
As we’ve been reporting, Indian corporations are gearing up to understand and implement the new accounting framework called Indian Accounting Standards (Ind-AS). The Ind-AS is almost the same as the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), which is followed by more than 100 countries.
Ind-AS will replace the current accounting standards followed by companies in India. The ministry of corporate affairs (MCA), the country’s governing arm, notified organizations in February of this year, and recommended its application in a phased manner as of April 1, 2016. Yes, that would be today. And, no, it’s not an April Fool’s prank.
Accounting experts in India have been assessing the gap in reporting standards which need to be plugged in as of today, and over a thousand companies whose net worth is at least Rs.500 crore (a unit in the Indian numbering system equal to ten million) are required to switch to the IFRS- compliant new accounting standard.
According to findings from a recent survey by PWC, folks are clearly not ready, as has been reported:
“More than 50% of the respondents are yet to plan or commence implementing changes at an organizational level. Also, 39 % of them are yet to start or plan for the impact assessment of Ind AS adoption,” states the report derived from a February 2016 PwC survey of 100 companies of various sectors and size. About 63 % of those surveyed are covered under mandatory phase I adoption of Ind-AS.
Ind-AS is a principles-based standard purporting to reflect the underlying economic substance of business transactions. The new standard also increases emphasis on fair-value accounting. Adoption of this new standard will clearly have a significant impact on both net worth and net income for companies across India.
|ROAD MAP TO IND-AS
|April 1, 2015:
April 1, 2016:
April 1, 2017:
With revenue recognition moving to the perspective of “the customer,” there are going to be radical changes in the revenue reported against existing Indian GAAP. This is going to affect employee emoluments and they may see a sudden dip /raise in their bonuses. That will surely trigger an ensuing panic to understand what has changed and why.