India likely to defer adoption of new accounting standard ‘Ind AS 115’

India is likely to defer the adoption of new accounting standard on revenue recognition (known as Ind AS 115) as more consultation is needed with the industry to clarify the requirements and to give examples to help implementation.

Technology and telecom companies are largely going be impacted with this standard. The new accounting standard on revenue recognition replaces the fragmented set of rules by which companies booked their revenues.

Under the rule, companies will have to recognise revenues in a way that shows the transfer of good and services to customers that reflects the payment to be received by company for each service separately.

«Telecom industry currently bundles all its services into one. After this standard comes into existence they have to unbundle the revenue for every service which has to be reported separately. This method is more scientific and transparent,» said Manoj Fadnis, president, Institute of Chartered Accountants of India (ICAI).

Other areas that could be affected include deferred and advanced payments and licensing arrangements. «We’re considering deferring this standard. The final decision will be taken in the meeting on July 31 where experts from International Accounting Standards Board (IASB) will also be present,» said Fadnis.

International Accounting Standards Body (IASB) has already deferred it by a year as some European telecom companies have sought clarity. The delay will also help India to align its standard with the US GAAP.

«We have to be in-line with the international standards,» said Amarjit Chopra, chairman, National Advisory Committee on Accounting Standards (NACAS).

If deferred, India will continue using the current standard IAS 18. As per the government roadmap all companies with networth of? 500 crore or more (whether listed or unlisted), should move to Ind AS (which has been converged with International financial Reporting Standards) from financial year beginning on or after April 1, 2016.

Source: The Economic Times – By Rajat Arora

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