IFRS in India: My Views 2010

Convergence with IFRS is good. but following the IASB is better

India has taken the decision not to adopt the IFRS but to converge. The decision, prima facie, seems to be quite a bold one and deserves appreciation too. However, when one gets into the details of the standards that the ICAI is trying to converge one can see that they are no different from the IFRS. I don t see any reason for the Institute to say that we will converge when the standards issued by it are same more or less same as the IFRS. Is honesty not a good policy? What is more disturbing is the process in which the standards are said to be converged with the IFRS. In my understanding, IFRS has to go through a rigourous process before they become standard. The sincerity and seriousness with which the small team of the IASB takes the process of setting standards is really praiseworthy and worthy of being emulated. It s time for us to learn from the experience and experiments of the IASB. Each standard takes the shape of a full-fledged project. There is a detailed web site for each project which shows all the relevant discussions and developments. Each exposure draft makes a journey to several parts of the world through the outreach programmes conducted all over the world. Several members of the IASB actively participate in such outreach programmes. During the last one and half years, such outreach programmes were also conducted by the IASB in India at several places on different topics such financial instruments , fair value lease accounting and revenue recognition and one of the directors of the IASB along a technical person attended all the outreach programmes in India. The outreach programmes are followed by the process of collecting written comments from several stakeholders. The most important thing that needs to be stressed is that all the comment letters are made available for public. After getting the comments from different stakeholders, the IASB conducts Round Table discussion at several places in different countries. The deliberations are also open for public viewing through web telecasting. Comments from our accounting fraternity is very rare to see on the public forum of the IASB. It is very difficult to understand the silence of our accounting fraternity. Is it shy to participate in the international regulatory process or is it too busy with its day to day activities? Do we follow such rigor in the process of rolling out of our standards? My personal understanding is that such rigour and sincerity is conspicuous by its very absence. We have some of the best accounting minds of the world. We have a strong regulatory environment which got its due recognition during the last financial meltdown. But it seems we are affected by the syndrome of starting too late and stopping too early and enroute compromise the rigour and respect for the process of standard setting. Whom should we blame for such status? Today, one can see a list of around 28 exposure drafts (EDs) on the web site of the ICAI claiming that they are open for comments. However, the closure date was some time during April, May and June 2010. Even with the best efforts it will be impossible for any body to go through these EDs and send the comments all at a time. Either the Institute is aware that none will respond or it was not interested in getting some serious responses. Moreover, I am not aware of any effort undertaken by the Institute for D.V.Ramana: November, 2010 Page 1

IFRS in India: My Views 2010

creating awareness about these EDs. Neither it has conducted any open discussion on the EDs nor it has shared the comments received ( if any) with the larger professional world. It is possible that the Institute is running against the time. But why are we in such a hurry? If we want to demonstrate to the world that we have the capability to develop our own standards by saying that we don t want to adopt the IFRS ,then it may be necessary to put in the needed efforts to come up the world class standards. I am sure with a little more commitment, our professional accounting community can come up with standards which may be replicated even by the IASB. If we don t want to adopt the IFRS then let us develop the appropriate standards after involving all the stakeholders. Let us deliberate on the relevant issues with more seriousness. Let have several dialogues at different levels and undertake field testing of the draft standards. Let us show to the world that we can formulate the most comprehensive and pragmatic accounting standards. Let us get the IASB to engage in dialogue with our accounting fraternity. I am sure we can do all these if we can learn from the rigourous process adopted by the IASB in developing the IFRS.

Feedback may be sent to: Dr.D.V. Ramana, Professor (Accounting and Finance Area), Xavier Institute of Management, Bhubaneswar, Orissa, India. Email: ramana@ximb.ac.in

D.V.Ramana: November, 2010

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