Do different industries need their own sets of accounting standards? The Institute of Chartered Accountants of India (ICAI) feels so, and is planning to bring industry-specific accounting standards into India. R.K. Agrawal, Director, Ernst & Young and a member of the ICAI, explains why: “The need for industry-specific accounting standards is not only felt in India, but all across the world. Existing accounting standards set out broad principles of recognition, measurement and disclosures. But very often these principles, on their own, are not enough for application in specialised industries. This results in various accounting practices on a particular industry-related issue. Take, for instance, the telecom industry, where there are different practices on how to account for activation income and activation cost.” Real estate, telecom, mining, oil and gas, agriculture, technology, and pharma are industries where the need for industry-specific accounting standards is foremost, adds Agrawal.
An ICAI spokesperson agrees that the process will be time-consuming. Particularly when the institute has its hands full “converging” with the International Financial Reporting Standards (IFRS). IFRS are accounting standards and interpretations adopted by the International Accounting Standards Board. Yet, the ICAI will need to get a move on with its plans for industry-specific standards, as chief financial officers (CFOs) across industry have been in favour of such standards, and expect major benefits from this move. “There will be clarity in accounting. Clarity will also result in appropriate planning, forecasting and budgeting as far as the company is concerned. There will be consistency in accounting. Once there is guidance, everyone will be doing it the same way. Accounting discretion will, therefore, be reduced,” adds Agrawal.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today