Indian accounting standards to converge with IFRS by 2011

Even though the government has announced that companies with a turnover of over Rs1,000 crore will converge by 2011, the industry and accountants still seek clarity on how to determine the "fair value" of assets and liabilities

The government today said that Indian accounting standards will converge with International Financial Reporting Standards (IFRS) by 2011, even as issues like fair value and depreciation are being ironed out, reports PTI.

"We are still working on fair value concepts and other issues like depreciation, but I can assure you that we will stick to the roadmap laid for the convergence of Indian standards with the IFRS," corporate affairs minister Salman Khurshid said on the sidelines of an Assocham seminar on International Financial Reporting Standards (IFRS) in New Delhi.

Even though the government has announced that companies with a turnover of more than Rs1,000 crore will converge by 2011, the industry and accountants still have differences on how to determine the "fair value" of assets and liabilities.

In accounting, fair value is used as an estimate of the market value of an asset or liability. While some accountants are of the view that the historical cost should be taken into account while entering the value of an asset, some believe the current value should be taken into account.

"Users are for the fair value concept, while accountants prefer the historical concept," Deloitte Haskins & Sells chairman N P Sarda said.

According to the roadmap laid out by the corporate affairs ministry, companies listed on the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE) or whose shares or other securities are listed on a stock exchange outside India, besides listed and unlisted companies with a net worth of more than Rs1,000 crore, are to converge with IFRS from 1 April, 2011.

Companies having net worth of exceeding Rs500 crore will join the regime from 1 April, 2013, while all other listed companies with a net worth of less than Rs500 crore will converge with IFRS by 1 April, 2014.

While all insurance companies will convert their opening balance sheets with IFRS from April, 2012, scheduled commercial banks and urban co-operative banks with a net worth of over Rs300 crore will adopt it from 1 April, 2013.

In addition, non-banking finance companies (NBFCs) which are part of the NSE or BSE or have a net worth of over 1,000 crore will converge their opening books of accounts with IFRS norms from 1 April, 2013. All listed and unlisted NBFCs with a net worth of over Rs500 crore will convert their opening balance sheet from 1 April, 2014.

According to the ministry's roadmap, urban co-operative banks (UCBs) with a net worth of less than Rs200 crore, unlisted NBFCs with a net worth of under Rs500 crore and regional rural banks need not follow the converged accounting norms.

Commercial banks with a net worth of over Rs300 crore and those UCBs with a net worth between Rs200-Rs300 crore will be required to convert their balance sheets to the new norms from 1 April, 2014, onwards.

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PE investment in India up two-fold to $ 2.3 billion in April-June period

The first two quarters of 2010 witnessed PE deals worth $4.29 billion compared to $4.32 billion in the entire 2009 calendar year

Witnessing a strong growth, private equity (PE) investment in India rose to $2.3 billion in the April-June quarter, taking the total PE inflows so far this year to $4.29 billion, reports PTI.

According to the monthly report of VCCEdge, the financial platform of VCCircle.com, private equity deals amounted to $2.3 billion in the second quarter of the 2010 calendar year against $990 million in the year-ago period.

An upturn was also witnessed in terms of the number of deals recorded in the said period. In the second quarter of this year, 24 PE transactions were effected, against 15 deals in the same period of 2009, the report added.

"Private equity investments in India continued to display steady signs of recovery in the second quarter of 2010. Deal value continued to increase for the sixth consecutive quarter and is nearly 3.5 times the value seen in Q1, 2009," the report said.

The first two quarters of 2010 witnessed PE deals worth $4.29 billion compared to $4.32 billion in the entire 2009 calendar year.

PE transactions worth $50 million and above accounted for 63% of the total capital invested during the quarter under review.

The largest PE transaction during the April-June period was Olympus Capital's $300 million investment in Tata Power's special purpose vehicle for developing Indonesian coal mines, followed by Temasek Holdings' $200 million investment in GMR Energy.
Another major deal was Temasek's acquisition of a 5% stake in the National Stock Exchange (NSE) for $175 million.

A sector-wise analysis shows that finance, energy and utilities were the most targeted sectors for investment, with deals worth $510 million, $320 million and $306 million, respectively.

In terms of the number of deals, the most active sectors were finance, consumer discretionary and information technology.

The top five deals accounted for nearly 42% of the total value of private equity deals in the second quarter of 2010.

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Govt clears 3-year drilling moratorium for oil explorers

Oil and gas exploration companies have not been able to meet their work commitments for the blocks they had won under the New Exploration Licensing Policy rounds because of a shortage of deep-sea drilling rigs

Faced with global shortage of offshore drilling rigs, the government today decided to give a three-year drilling holiday or moratorium to firms such as state-run Oil and Natural Gas Corporation (ONGC) and Reliance Industries (RIL), reports PTI.

The Cabinet Committee on Economic Affairs (CCEA) meeting chaired by prime minister Manmohan Singh approved a drilling moratorium from 1 January, 2008, on 30 exploration blocks — 16 of ONGC, 13 of RIL and one of Italy's Eni, official sources said.

Companies such as ONGC and RIL have not been able to meet their work commitments for the blocks they had won under the New Exploration Licensing Policy (NELP) rounds because of a crunch in availability of deep-sea drilling rigs.

Sources said the CCEA approved a drilling holiday from 1 January, 2008, to 31 December, 2010, for 30 blocks awarded in the fifth round of NELP.

Globally, oil and gas explorers are faced with huge shortage of drilling rigs as countries stepped up oil and gas hunt in the wake of the surge in crude oil prices in 2008.

Day-hire charges for a deep sea drill rig had shot up 250% between 2007 and 2008.

But for the drilling holiday, the companies faced huge penalties for not fulfilling their work commitments that included drilling of a certain number of wells.

The petroleum ministry had first moved the Cabinet for the three-year drilling holiday or moratorium in 2008-end but the proposal was withdrawn after the finance ministry wanted a system of incentives and disincentives introduced to reward and punish companies based on performance during the period.

A grade system of incentives and disincentives will differentiate between companies that have completed the drilling work programme in deepwater acreages, which are being considered for a rig moratorium within the proposed three-year exploration holiday period or earlier and those which fail to complete the work, sources said.

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