Manfred Hannich, Global Head of Accounting Advisory Services, KPMG, was in India, to meet top companies on the adoption of the International Financial Reporting Standards (IFRS) by April 1, 2011. He spoke to BT’s Suman Layak on the subject.
Q. China is adopting the IFRS standards from 2008. Do Indian companies face a disadvantage due to the three-year delay?
A. What China has is IFRS with a local flavour. Global investors really don’t know how similar it is to modern IFRS. Indian companies will face a disadvantage only compared to Australian or European companies who have moved faster towards it.
Q. Please explain the salient features of IFRS.
A. Under US GAAP, only net income and equity are reconciled. But IFRS brings about a change in accounting philosophy. Apart from restating profits, even contracts and executive remuneration can get affected.
Q. RBI and the I-T department have not yet approved IFRS. How critical is this?
A. The main reason Indian companies filed US GAAP was that they had to file their accounts with the SEC. Similarly, the need to raise capital in foreign markets will goad companies into adopting IFRS. There will be issues, but with modern software, it’s possible to report to shareholders and investors with IFRS and to the income tax department under the country’s tax laws.