Global accounting to attract investment

By Goutam Das

Bengaluru

Aug. 26: There is an opportunity for India to dominate the world of accounting and finance if it makes a transition to the International Financial Reporting Standards (IFRS) from the currently followed Indian Generally Accepted Accounting Standards (I-GAAP), CFO of Sify M. P. Mr Vijay Kumar feels. His firm is the first in India to adopt the international standard, expected to generate more transparency for investors.

"Accounting literature is prepared by the US community and representatives from the European Union. Today, even though our accounting body is the second largest in terms of the number of chartered accountants in the world, we still don’t have an opportunity to influence the standard setting process. Once we adopt IFRS, Indian talent can represent the International Accounting Standards Board," he explains.

At the moment, the view appears aspirational considering the challenges in migrating to a new standard. KPMG cites changes required in the regulatory framework, greater complexity in financial reporting process, as well as significant one-time expense as the possible bottlenecks.

However, many also argue the migration is inevitable considering that more than 100 countries are already aligned to IFRS and in a globalised world it makes little sense to hold on to national standards.

The government, nevertheless, is keen on a "convergence" with the international standard by 2011 but not real adoption. Companies would still have to prepare multiple financial statements when they look to raise international capital, acquire or merge.

KPMG’s head of IFRS Implementation Services Mr Jamil Khatri says several companies which seek to raise capital and list securities in foreign exchanges may be required to convert their financial statements to IFRS to meet regulatory requirements or expectations from investment bankers and investors. In the absence of IFRS reporting, it may result in delays and additional costs related to dual set of financial statements.

Wipro’s CFO, Mr Manish Dugar agrees. "The cost of mobilising capital will come down under IFRS. Besides, you can easily raise funds from a country that gives you an interest arbitrage," he tells. The Bengaluru-based company is likely to move to IFRS by the first quarter of the next financial year.

Besides better access to global capital markets, what appears more pertaining is the relevancy the standard promises to investors and lenders.