It looks as if government may allow for SMEs to follow a bit diluted version of new global accounting standard called “International Financial Reporting standards (IFRS)” to reduce compliance cost for them.
IFRS, to introduce to new followers of the blog, is a globally accepted set of accounting norms. The same is going to be made mandatory for the purpose of reporting the financial information of any business entity form the fiscal year starting April 2011.
Convergence of current accounting norms with IFRS will require major accounting changes and will also demand large disclosures. Presenting company’s accounts as per IFRS will involve huge cost and thus may become a great hurdle for SMEs.
The International Financial Reporting standards Board’s Draft IFRS for SMEs is already there, which is already a watered down version. This provision by IFRS board has been drafted, so as to make is easier for SMEs to comply with it, as the same can be adopted without much drain on company exchequer.
Within normal course, even before large company’s converge to IFRS, various Acts like, Companies Act, Insurance Act, SEBI Act, and RBI Acts will require amendments to be incorporated, so as to enable companies in the same and related sector to converge with International Financial Reporting standards [IFRS].