IFRS Update: 3-year relaxation granted by EU on adopting IFRS ends in Dec

Indian issuers of global depository receipts face an uncertain prospect as a threeyear relaxation granted by the European Union on a new accounting standard comes to an end in December.The EU had granted time to 100 odd companies to migrate to the universally accepted International Financial Reporting Standards by December 2011,after the Indian government gave an assurance that the new guidelines would be rolled out in time.However,the government has deferred the new standard and it is still not clear when the companies would be able to adopt IFRS,according to auditors and chartered accountants.The uncertainty over GDRs comes at a time when markets watchdog Sebi has barred seven companies from raising funds after it found they were manipulating shares prices after issuing depository receipts,or proxy for shares.The Committee of European Securities Regulators had also allowed companies from China,Canada and South Korea to list their GDRs despite not having IFRS-compliant balance sheets,which is mandatory for any company to list in Europe.In its 2008 recommendations,the committee had taken note that the Institute of Chartered Accountants of India would modify the IFRS to reflect Indian conditions such as requiring additional disclosures,changing terminology and omitting some options or alterative treatments.These modifications were termed Ind AS.With the deferral of implementation of Ind AS and the deviations between Ind AS and IFRS,Indian companies will not be in a position to make a statement of compliance with IFRS in their financial statements at least for the next few years, said Jamil Khatri,head of accounting advisory at KPMG.A question therefore arises on whether Indian companies with outstanding GDR,or which plan to issue new GDRs,will be required to provide separate IFRS-compliant financial statements for periods commencing from April 1,2012, he said.Although the Ind AS made major changes to the IFRS to suit Indian companies,they were not in line with the norms required for GDRs.The impact of the expiry of the deadline will be limited.The total number of GDRs from India is very small compared to the overall market.They are traded over the counter and will not have any impact on the equities market, said Arvind Parakh,a finance director with JSL Stainless.Khatri said the impacted companies should take stock of their IFRS implementation projects.This would enable them to plan for meeting their reporting obligations if the Commission decides not to provide any further relief from IFRS reporting.

In the Lurch 

The EU granted time to 100 odd cos to migrate to IFRS by December 2011 The govt gave assurance that the new guidelines would be rolled out in time But,the govt has deferred the new standard and it is unclear when the companies would adopt IFRS The EU Panel had also allowed cos from China and South Korea to list their GDRs despite not having IFRS-compliant balance sheets Mnay say as most GDRs are thinly traded the impact of the expiry of the deadline will be limited

Source: ET, Oct 5, 2011