Mumbai: Indian banks are hiring consultants to train their employees in International Financial Reporting Standards (IFRS) as they take the lead in ensuring compliance with the new global accounting standard that kicks in from 2011.
Part of the reason is practical: Banking, more than any other business, will feel the impact of the new rules the most as banking operations involve multiple financial instruments that face the brunt of the changeover.
Smooth transition: IBA chairman M.V. Nair says the IFRS working group of RBI and IBA will meet in 10-12 days to discuss the guidelines. Abhijit Bhatlekar / Mint
Indian firms are required to maintain their accounts under the new standard, starting April 2011. However, a comparative figure for the previous year has also to be provided, effectively advancing the transition to April 2010.
With barely six months to go, banks are setting up internal cells dedicated to IFRS accounting, according to bankers, although banking regulator Reserve Bank of India (RBI) is yet to clarify its position on the new accounting standard.
To come up with the guidelines on the new accounting norm, a working group committee has been formed by the Indian Banks’ Association (IBA), the apex bankers’ lobby in the country, and RBI.
According to IBA chairman M.V. Nair, who is also the chairman of Union Bank of India, the working group committee will meet shortly to discuss the guidelines shortly.
“The IFRS working group of RBI and IBA will meet in 10-12 days to discuss about the new guidelines. A lot of issues have to be addressed and we have to adopt IFRS suitably to fit India’s need,” Nair said.
Nair said his bank is also gearing up for switching over to IFRS and a top management committee of his bank met on Wednesday to come with a diagnostic study of the IFRS accounting by October this year.
“We hope to come up with a parallel balance sheet based on IFRS by 31 March 2010,” said Nair.
Bank of Baroda chairman M.D. Mallya also said his bank has created an internal cell of top management executives for implementation of IFRS in the bank.
“The committee will guide us for a smooth transition to IFRS and when we are required, we will be ready with IFRS compliant accounts,” said Mallya, also the deputy chairman of IBA.
Meanwhile, audit firms such as PricewaterhouseCoopers (PwC), KPMG, and Ernst and Young are working with banks to help them meet the deadline
“From an initiative perspective, banks are more forthcoming than others because IFRS impacts them the most,” said Shrenik Baid, executive director of Price Waterhouse, a unit of PwC, one of the four big accounting firms globally.
Jamil Khatri, head of accounting advisory services at KPMG in India, said his firm was “not only training most major banks on understanding IFRS but also doing a lot of work on a project management basis”.