EU extends date for Indian cos to meet accounting norms

More than 250 Indian companies, listed in bourses of countries in the European Union (EU), now have three additional years to comply with international accounting norms. The deadline was to expire this month. The move comes as a relief for many Indian firms that could have been forced to re-audit their financial statements as per International Financial Reporting Standards (IFRS) or halt operations. These firms, still following Indian accounting standards to report their financial performance, could not shift to the IFRS practices. The European Commission recently ruled that the accounting standards of India should be treated at par with IFRS temporarily. The same is applicable for companies incorporated in the US, Japan, China, Canada and South Korea. However, these firms have to meet the IFRS requirements in the next three years. The EU, which made IFRS compliance a must for all its listed entities way back in 2005, had earlier asked foreign entities on its soil to ensure convergence to IFRS by this year-end. Earlier this year, the Indian government had announced its commitment to converge the Indian accounting standards with IFRS by April 2011. The move was apparently made to safeguard the interests of the Indian entities having their presence in EU. “... The measures will mean that foreign companies (emphasis India) listed on EU markets will continue to file their financial statements prepared in accordance with those GAAPs (Generally Accepted Accounting Principles)...,” a EU release said. It said that the present move will “eliminate existing costly and burdensome reconciliation requirements between EU and its key trading partners.” However, the EU will review the IFRS convergence programme happening in India, China, Canada and South Korea by latest 2011. The European Commission will also regularly monitor the ongoing status of equivalence in these countries. The Indian government and its accounting regulator the Institute of Chartered Accountants of India (ICAI) has taken a number of steps towards the convergence initiative which includes regulatory changes as well as transitional preparedness. Says Rahul Roy, Director, Ernst and Young India “While the EU’s move is a testimony to the application and rigor of accounting standards in India, it also acknowledges the genetic similarity between Indian accounting standards and IFRS.” Mr Roy, a former president of ICAI, said that the move also recognises India’s commitment to converge with IFRS.