Rejig of Cabinet ministers - What is the impact?

With the 2G and other scams around, the PM reshuffled the ministry except the Home, Defence, Finance, External Affairs.

It looks like Mr.Murli Deora, the man behind free pricing of Petroleum has taken over the Corporate Affairs from Mr.Salman Khursheed. 

Mr.Salman Khursheed is now given the Water Resources and additional charge of Minority Affairs.

In a corporate environment, we allocate based on the experience and here it looks like experimental. That too at the cost of the public. One thing the PM made sure is that no minister is dropped and only the portfolios have been changed.

What is so important about Mr.Deora & Mr.Khursheed, when most of them were shuffled? 

• As a  Corporate finance person, everyone is looking for the IFRS convergence and with all odds, Mr.Khursheed was able to get the things moving in the parliament. Now we need to see the pace of the IFRS with changes to Companies Act and other related areas.
• The name change for the ICWAI was well received by Mr.Khursheed. Now we have to see how this is being taken further.
• ICAI, ICWAI & ICSI has to rebuild the relationship with the new minister.

My thanks to Mr.Khursheed for all the support to the Corporate world and let us wait and see whether Mr.Deora can fuel the momentum given by Mr.Khursheed in the above areas.

Cheers,

Gopal

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Another day in ICWA Institute - This time on IFRS

Last Monday I gave a presentation to the members of ICWAI - Bangalore Chapter, on how to go about the IFRS implementation. This was arranged as a Professional Development meeting.

I was really thrilled by the following:

• The Institute president Shri.G.N.Venkatraman presided over the session
• There turnout was really good. Nice to see many members interested in the topic.

We were informed that Shri.GNV was on board of NACAS and the Institute is actively working on the IFRS.

Shri.GNV gave an update on the latest happenings in the Institute. He invited the members to be more participative in the IFRS journey and the professional development. Shri.GNV already set the context of IFRS implementation in India, which made my job easier, as I could directly jump to my slides, without spending too much time on what the IFRS is all about.

I decided, in the interest of time, to present the slides and then take the Q&A at the end. I have seen in many meetings, small questions drag the time and finally important discussion points will be missed out or just being rushed (or just read by the presenter).

I covered the presentation covering the following areas:

• What is IFRS
• What is the current scenario in the countries already implemented
• What is the scene in india
• How to plan the transition
• Challenges
• The opportunities for the preofession

The presentation was well received and appreciated. There were lot of good questions, which I answered to my best and to the satisfaction of the person asking the question.

It was a good session and I really enjoyed. My friends, Satish and Raghavan was with me during the session.

Not only I got 1 CEP credit hour, but got a lot of satisfaction that I ignited the minds to get into IFRS soon.

Cheers,
Gopal

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CFO Forum on IFRS....organised by CII & EY

Today I attended the CFO Forum on IFRS, with a focus on Technology, Real Estate & Manufacturing.

Jayaram, Convenor - CII, Karnataka, gave the welcome address.

The speakers were the experts in the area. Yes, we had

• Ruth (Global IFRS Leader of EY and a member of the IFRIC).
• Dolphy (IFRS Leader, India EY)
• Harriet (IFRS expert)
• Kaustav & Navin (EY Partners & IFRS experts)

We had the opportnity of listening to Ruth, who is an IFRIC member representing EY on the global experience.

Dolphy took us through the transition plan in India

Kaustav & Navin took us through the sector specific issues and covered, Technology, Real Estate & Manufacturing.

After this we had a panel discussion, where the CFO of well known companies from the Real Estate (Shobha), Infrastructure (GMR), Engineering (ABB), Techonology (HP) were present.

It was a good knowlege sharing session, which ended with a conculding remarks from Sunil of EY.

Since we were nearing the deadline of implementation of IFRS, we had some good insight to the subject and learning.

Some key learning:

• IFRS implementation is sure. No postponement
• Relevant changes to Companies Act, will be made to take care of the financial reporting
• Tax implications, still a grey area
• US is committed to move to IFRS.
• India will be adopting the IFRS, as it is and no changes / tinkering.
• CA Institute and MCA is working towards the smooth implementation.

I would request all accountants to get prepared for the IFRS, learn it (First unlearn the existing standards) and make use of the situation (the demand for the IFRS experts).

Cheers,

Gopal

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2 sets of Standards under Companies Act for achieving IFRS convergence

Friends,

The much awaited plans for the realistic IFRS roadmap is here. It has been decided to go in phases to facilitate smooth convergence.

Following is the press release issued by the Ministry of Corporate Affairs laying down the IFRS convergence road map, on Friday, January 22, 2010.

It is a good opportunity for the members to get into the IFRS, as we have time and also can learn from the experience of the first set of people adopting the IFRS.

Cheers,
Gopal

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IFRS based accounts for Small and Medium Enterprises (SME) deferred

Recently read an article in Economic Times on the IFRS adoption by Small & Medium Enterprises.

It is well known fact that change is very difficult. But if is for good, then it is not to be taken as a difficulty and should be welcomed. No pain - No gain. Given that there is a cost involved in adopting IFRS by SMEs, it was felt that the adoption to be deferred. Also, it need to be noted that the IFRS for SMEs are little lenient than the regular ones.

With the Income Tax department, still not able to appreciate the current Accounting Standard, moving to IFRS and that too separate on for SME and non-SMEs will create confusion. 

More than anyone, the Income Tax department should undergo training to appreciate the accounts presented under IFRS. 

Following is the news article, which appeared in The Economic Times:

NEW DELHI: Small and medium enterprises (SMEs) in the country will not have to prepare their accounts as per the International Financial Reporting Standards (IFRS) from April 1, 2011, saving them significant cost of switching to the more rigorous accounting standard A government-constituted core panel on IFRS has decided to exempt SMEs from the first phase of convergence falling due in 2011.

“The SME sector, which contributes significantly to the Indian economy, will continue to follow existing Indian accounting standards , which may be modified from time to time to make the sector more competent in the international arena,” said Uttam Prakash Agarwal , president, Institute of Chartered Accountants of India (ICAI).

Convergence to IFRS is a costly exercise which includes an overhaul of operational and IT processes apart from training costs. A small enterprise for this exemption is likely to be one where the investment in plant and machinery is more than Rs 25,00,000 does not exceed Rs 5 crore.

A medium enterprise is one where investment in plant and machinery is more than Rs 5 crore but does not exceed Rs 10 crore.

In November last year, the government had hinted at preparing a watered-down version of IFRS for the SMEs. “Industry preparedness in converging with IFRS is a key factor, specially for SMEs who may feel the convergence as cost-prohibitive ,” R Bandopadhyay , secretary in the ministry of corporate affairs, had said.

Stating company’s accounts as per IFRS will involve huge cost and is being considered world wide as a hurdle for SMEs.

Recently, a core committee of the government finalised the road map for IFRS convergence in India. The ICAI has said that all entities having net worth in excess of Rs 1,000 crore will have to follow IFRS. The list also includes all NSE and BSE listed companies, entities having foreign borrowings of more than Rs 500 crore, insurance entities , mutual funds, venture capital funds and all scheduled banks having operations outside India.

Cheers,

Gopal

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IFRS - Phased implementation in India

I attended a two day IFRS workshop last week. It was really good. With the deadline for IFRS implementation nearing and in another 4 months the comparative period will start, we need to gear up for the IFRS adoption / convergence / migration (you can choose whatever you feel).

What India Inc is going to do? It was decided to go in phases and key representative from various industries are picked up for the I phase. Nifty companies, banking, insurance companies are pulled into the I phase.

The first list comprises 439 companies. It includes

• BSE-Sensex companies
• NSE-Nifty companies, 
• companies that have raised debt of over $50 million abroad, 
• financial sector companies, 
• publicly accountable companies (with total borrowings of over Rs 1,000 crore), 
• Indian subsidiaries of foreign companies that have implemented IFRS at the parent company and 
• companies outside these categories with capital of over $50 million abroad.

ICAI is also mulling including venture capital funds also in the IFRS convergence process.

The first list includes

• BSE and NSE companies                                                         - 52
• insurance companies                                                             - 44
• mutual fund companies                                                          - 46
• Indian banks with presence only in India                                 - 37
• foreign banks with a presence in India                                   - 30
• Indian banks with overseas branches                                      -  8
• Indian bank with subsidiaries/JV abroad (Central bank of India)- 1
• Indian banks with representative offices abroad                       - 4         . 

This cleary shows the commitment of India to the IFRS implementation.

Let us gear up for the same. You can now expect more postings on IFRS.

Cheers,
Gopal

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IFRS roadmap for India - Convergence

JOINT MEETING OF THE CORE GROUP AND THE TWO SUB-GROUPS ON THE IMPLEMENTATION CHALLENGES WITH REGARD TO CONVERGENCE OF INDIAN ACCOUNTING STANDARDS WITH IFRS EXPRESSES CONFIDENCE IN THE ISSUANCE OF THE ROADMAP AT AN EARLY DATE FOR CONVERGENCE TO ENABLE ADHERENCE TO THE TARGET DATE OF 2011

The High Powered Core Group for discussing and resolving the implementation challenges with regard to convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS) from the year 2011 has expressed confidence in the issuance of the roadmap at an early date. In its meeting held today at Mumbai at SEBI Bhavan the Core Group expressed satisfaction about the progress in developing necessary capacity and capability to bring about the convergence and decided to accelerate efforts to engage with more stakeholders in this process. Ministry of Corporate Affairs had set up this High Powered group comprising various stakeholders under the Chairmanship of Shri Anurag Goel, Secretary. The Core Group is supported by two sub-groups. The first sub-group headed by Shri Y.H. Malegam, Chairman, NACAS is to identify changes required in various laws, regulations and accounting standards for convergence with IFRS and to prepare a clear roadmap for achieving the same. The second sub-group of CFOs under the Chairmanship of Shri Mohandas Pai, Director, Infosys would interact with various stakeholders in order to understand their concerns on the issue of convergence with IFRS, identify problem areas and ascertain the preparedness of the stakeholders for such convergence. Today’s meeting was a joint meeting of the Core Group and the two sub-groups to assess the preparedness of the industry and to arrive at a roadmap for convergence. The meeting was chaired by Shri Anurag Goel and was attended by Shri C.B. Bhave, Chairman, SEBI, Shri Y.H. Malegam, Chairman, NACAS, Shri Mohandas Pai, Director, Infosys, Smt. Usha Thorat, Deputy Governor, RBI, Mr. Kannan, Member, IRDA, Mr. Uttam Agarwal, President, ICAI and other senior government officials, CFOs of the industries, representatives of ICAI, IBA and other stakeholders. There were detailed deliberations on the presentations made by the two sub-groups on various implementation challenges especially those related to legal and accounting framework and transitional issues. Further, sector specific challenges especially in the banking, insurance, shipping, small & medium enterprises were also discussed. The ICAI presented the details of a comprehensive capacity building programme which the Institute is carrying on to prepare the CA profession for this transition and stated that a large number of professionals have undergone training and the process is being accelerated. The Chairman of the Accounting Standards Board of ICAI placed on record that the convergence project is at an advanced stage of completion. CFOs present in the meeting stated that industry was getting prepared though there were some concerns from smaller companies. They also requested amendments to the Companies Act and other Regulations and also the early exposure of accounting standards which are IFRS compliant, to enable them to prepare for meeting the deadline. The discussions were encouraging and witnessed strong support for convergence from all participants in the meeting. --------------------- KKP/ska Soucre : PIB Press release http://www.pib.nic.in/release/rel_print_page.asp?relid=51580

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Two-day WORKSHOP on 'I F R S' - Chennai

The Management Academy, Chennai, is organising a
Two-day WORKSHOP on 'I F R S'

Date: 7th & 8th August 2009 Time: 10.00 A.M - 05.30 P.M

Venue: Hotel Ambassador Pallava, Montieth Road, Egmore, Chennai - 600 008.

Speakers: Shri R.G. Rajan & Shri N.R.Govindarajan, Chartered Accountants.

(Expert Speakers on IFRS & Accounting Standards)

Fees: 8000/- Per participant. In case of two or more participants from the same organisation, the participation fee will be Rs.7,500/- per participant.

For nominations & further details, please contact
C. SRIRAM
DIRECTOR
THE MANAGEMENT ACADEMY
F-3, LAKSHMI FLATS
52&53-B, II MAIN ROAD, SENTHIL NAGAR,
KOLATHUR
CHENNAI - 600 099.
092831 27226

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International Financial Reporting Standards (IFRS)...2

Having seen what is IFRS and why we need IFRS, let us now get into the IFRS little more. The approach I am going to take is, discuss on the following lines:

• How this IFRS evolved (to give a brief background)
  
• Give some background on the implementation in the world
• How many standards that are there?
• The plan in India for the convergence
• Give a brief summary of each of the standards

Do let me know if you need to have any more details that need to be covered.

How this IFRS evolved?

In 1973, the International Standard setting began through an agreement reached by 9 worldwide professional accounting bodies and resulted in the formulation of the International Accounting Standards Committee (IASC). The IASC comprised representatives from 14 countries and was the international standard setting body.

In 2000, the IASC's constitution was amended and a group of trustees were appointed. The IASC was renamed as the International Accounting Standards Board (IASB). IASB issues the IFRS. We saw in the earlier post that many countries in Europe and Asia Pacific made it mandatory and also the US. Having understood the benefits and seeing the universal acceptance, it was decided that India will also follow the suit.

In India, the accounting standards are issued by the Institute of Chartered Accountants of India (ICAI) and they are working on a smooth convergence with IFRS from the accounting period beginning on or after 1st April, 2011. Does that mean that we need to wait till 2011? The answer is NO. Why NO?

If you adopt IFRS for the period ending 31-mar-2011, you need to re-state the previous year's figures also under IFRS. So you need to convert the previous year's (period ending 31-Mar-2010) also under IFRS. So you need to do the exercise in 2009 close itself. We need to gear up in getting us prepared for the convergence.

There are many questions raised, as to :
1. whether it can be implemented in India?
2. whether it is that easy to implement?
3. what is the impact on Income tax?
4. Do we need to maintain separate set of books?
5. to what type of companies, the IFRS will be made mandatory?

You can add more questions...I do not have answers to most of the questions. ICAI is putting all its efforts to make it possible. But it has to work with the following regulators to make sure that the convergence is smooth and seamless:

a. RBI (reporting for the Banking companies)
b. IRDA (reporting for Insurance Companies)
c. Ministry of Corporate Affairs (for companies) & SEBI (for Listed companies)

Why do ICAI need to work with them? As you may be aware that the presentation of Financial Statements are governed by these authorities. For example, Schedule VI to the Companies Act, 1956 prescribes the minimum data that every company incorporated under the Act should publish in its audited Annual Accounts. Also, the Income Tax Act and Rules need to be changed/modified to take into consideration the future change in the accounting per IFRS. For example, if the financial statments are presented on a fair value basis, there bound to be unrecognised gain or loss. This will have an impact on the taxability.

Okay, while the ICAI is working on achieving their goal, let us start our preparation in understanding the IFRS. Let us start our journey with the assumption that ICAI is able to get the concurrence from the ministry to make it happen, as planned.

Some abbreviations that would be mostly used in the discussions,

• ASB - Accounting Standards Board (in India)
• GAAP - Generally Accepted Accounting Principles
• IAS - International Accounting Standards
• IASB - International Accounting Standards Board
• ICAI - Institute of Chartered Accountants of India
• IFRIC - International Financial Reporting Interpretations Committee
• IRDA - Insurance Regulatory Development Authority
• MCA - Ministry of Corporate Affairs (in India)
  
• NACAS - National Advisory Committee on Accounting Standards
• RBI - Reserve Bank of India
• SEC - Securities and Exchange Commission (in US)
• SEBI - Securities and Exchange Board of India

Following are the IFRS that are issued till date:

• IFRS 1 First-time Adoption of International Financial Reporting Standards
• IFRS 2 Share-based Payment
• IFRS 3 Business Combinations
• IFRS 4 Insurance Contracts
• IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
• IFRS 6 Exploration for and evaluation of Mineral Resources
• IFRS 7 Financial Instruments: Disclosures
• IFRS 8 Operating Segments

Let us get into each one of them slowly. I will also try to show how this differ from our Indian Accounting Standards and also USGAAP (to some extent)

Cheers,
Gopal

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International Financial Reporting Standards (IFRS)...1

With my limited knowledge on the IFRS, I try to post articles and would like experienced persons to give their valuable feedback.

What is IFRS and why IFRS?

The International Financial Reporting Standards (IFRS) are becoming a globally accepted with over 100 countries mandating it. The listed companies in European Union started adopting these standards. Following the EU, major countries in Asia Pacific ( like Australia, Hong Kong, China, Philippines) have started mandating the IFRS for publicly listed companies. The latest development being SEC allowing to file IFRS statements and started moving towards IFRS from their GAAP.

In India, IFRS would be made mandatory from 1st of April 2011. The Institute of Chartered Accountants of India (ICAI) is working towards the convergence. The recent Accounting Standards are being made in line with the IFRS, so that the convergence could be made easy.

I would like to start wrting on the IFRS (both for Indian as well as other countries) methodology. Though the standards are supposed to be uniform throughout the globe, there exists some minor deviations country-wise, without taking out the essence.

Let us go step by step in getting to know about the various IFRS!

Cheers,
Gopal

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