Going global

New Delhi, Jan. 3: The move to bring the Indian accounting and auditing standards on a par with international standards is on course but needs to gather momentum.

The Institute of Chartered Accountants of India (ICAI) has been given the task of bridging the gap between the Indian and international accounting standards over the past five years. ICAI is focusing on bringing both accounting and auditing standards on a par with international best practices. It was only in 1998 that the Companies Act made it mandatory to follow accounting standards, even though the Accounting Standard Board (ASB) was set up in 1977.

At present, there are 29 accounting standards which are in compliance to the 41 International Accounting Standards (IAS). From last year, IAS is referred to as International Finance Report Statement (IFRS). “But IFRS standards are themselves going in for major improvements and unless we have our own improvement project to mirror those changes, we will not be able to catch up with them,” said Rahul Roy, partner at S.R. Batliboi & Company (Indian partner of Ernst & Young).

Roy, a former ICAI president, said, “Keeping up with the accounting standards is like running on an escalator: the other person is on another escalator that is running faster.”

Apart from comparable standards, ICAI also issues guidance notes where there are no standards on subjects corresponding to international accounting standard for example on international accounting standard 15 on information reflecting effect of changing prices.

However, there are certain international accounting standards which are not considered relevant for the issuance of either standards or guidance notes, for example financial report in hyper inflationary economies, as such a condition does not prevail in India.

However, standards are under way to correspond with IAS 32 on financial instruments: disclosure and presentation and one that is in parity with AAS 41 on agriculture.

“The prime idea is to make the Indian industrialists and chartered accountants competitive in the international arena,” said N. D.Gupta, former president of ICAI and a council member.

Companies feel the parity between the accounting standards is essential, especially when domestic companies have to keep pace with transnational corporations.

“Indian accounting standards are rapidly moving towards international accounting norms and that is very good. some accounting standards brought in like those on impairment of assets, is of a very high order of sophistication and comparable to the best in the world,” said Rajan Verma, chief financial officer of Dabur India.