Bengaluru, 24 April 2015: Confederation of Indian Industry (CII) in association with KPMG, organized a breakfast session to create awareness on the changing face of Financial Reporting & Tax Reporting in India - Adoption of Indian Accounting Standards (Ind-AS) & Income Computation and Disclosure Standards (ICDS), in the city today. The introduction of both Ind-AS and ICDS, has brought about significant changes in financial and tax reporting requirements for companies. The session saw eminent speakers from the regulatory, corporate and consulting world sharing their thoughts on adoption of Ind-AS and ICDS in India.
Calling the implementation of ICDS a step in the right direction, Mr. Shashikant Shenoy, Director, KPMG (India), said that there is very little awareness on ICDS among Indian companies. This is mainly because the ICDS draft came out only in January 2015 and on 31st March 2015, 10 Standards got notified in place of AS One and AS Five. So it has become very difficult for Indian companies to keep pace with the change. ICDS applies to all income tax assesses which has income under profits and gains of business of profession.
Considering the extend of difference between Ind-AS and ICDS most large corporates will need to consider the process and system changes that may be warranted to implement ICDS and maintain records as per these two sets of standards. Considering that the information computed under ICDS will be subject to audit through the tax audit process. It becomes all the more important for companies to maintain information in manner that provides an audit trail.
During his theme address, Mr. Sai Venkateshwaran, Partner & Head of Accounting Advisory Services, KPMG in India, said that with the notification of these accounting standards Indian Financial reporting has undergone seismic shift by introducing the most contemporary standards. It is a paradigm shift that introduces several new and complex concepts, accompanied by detailed quantitative and qualitative disclosures. On the whole, it would lead to a better reflection of the financial performance of an entity and more relevant information in the hands of users of financial statements.
According to him, the ball is now in India Inc’s court, as the Government has kept its date with IFRS convergence. The corporate sector will now need to do its part to make the implementation a success, starting with an acknowledgement of the fact that this is not just an accounting change, but something that impacts the whole organization and the way they do business.
Mr. Madhu Sudan Kankani, Partner, KPMG (India), while speaking on Managing IFRS convergence in an enterprise wide perspective touched upon the key impact areas of Indian corporates said that the implementation Ind-AS along with other changes such as ICDS as well as key changes made in the Companies Act 2013 would bring about a substantial change in the financial reporting frame work. Indian companies will need to ensure appropriate planning and consider wider implication beyond just the external reporting for a smooth transition.
Mr. Madhusudan Rao, Co-convenor, CII Karnataka Economic Affairs Panel said that in 2009 India signed an agreement with G20 countries to adopt IFRS, following which the Ministry of Corporate Affairs laid out a road map for IFRS. From 2011 to 2015 there was no movement on this due to several issues including that of tax. In 2014-15 in his budget speech the finance minister eluded to the fact that IFRS will be adopted, and Government has given some guidelines in February 2015 stating that companies which qualify i.e. listed and unlisted companies with more than 500 crore net worth have to report IFRS form 1st April 2015 onwards.
According to him the issue is that we have not adopted IFRS in total, the ministry has issues Ind-AS guidelines which is a path to converge to IFRS.
Speaking from an Industry point of view Mr. Srinivas Palakodeti, Chief Financial Officer, Hinduja Global Solutions Limited, said that this is going to be a challenging year because you will have one set of numbers which you will report for quarter ended June 2015 but when you do the comparison with June 2016 you could reach completely different set of numbers so effectively you will have to have 2 sets of numbers one under the existing accounting standards and one at the end of June 2016, so it is better to be prepared so that you don’t have to redo everything one year from now.
The panelist discussed extensively on Reporting and business implications of adoption of Ind-AS, Adoption of ICDS and how CFO and Corporate sector can manage the transition.