Sub: Executive Summary of the seminar held on 13.08.2004 at NIFM on Global Financial Reporting (Role of Accounting Standards,

International Accounting Standards and US GAAP).

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The booklet circulated by NIFM includes presentations made by various speakers on global financial reporting. These are summarized below:

1. Shri Sunil Goyal, President, Institute of Chartered Accountants of India, dwelt upon the requirement of harmonized accounting standards for reporting entities in view of increasing activities of these entities across the countries. The case has been made out for increased acceptance of internal accounting standards, based on compliance with “accepted principles” for accounting as opposed to `rule-based’ accounting standards under US GAAP. India has already decided to follow IASB approach of `principle-based’ accounting standards for formulation of Indian Accounting Standards (IASs).

2. Shri Rahul Roy, Professional Practice Director, Assurance Practice, India, stressed the need for legislative support for Accounting standards formulation. Need was emphasized for industry specific standards as is being developed in USA. He also brought out a specific need for standards on extraordinary items. Further, following points were made:

(i) Expenses on asset creation shall be expensed within current financial year.

(ii) Focus should be laid on `fair value’ than historical cost of assets and;

(iii) Interest incurrent on inventory purchased on credit should be charged to profit and loss account.

3. Dr. K.P. Kaushik, Associate Professor (SG), Financial Management, covered the topic of `financial reporting convergence’. His observations on Accounting standards issued by ICAI are summarized at page 38 to 40 of the booklet. A strong case has been made for reconciling Indian Standards with those laid down by International Accounting Standards Board for the ICAI led financial reporting is short of achieving global convergence and is set in the background of age old requirements of the Companies Act. There is a need to rework the company law.

4. Shri Kaushik, Office Managing Partner, Assurance Practice, dwelt upon corporate governance aspect in financial reporting and informed that a well-governed company fetched more premiums in the market. This implied that corporate sector needs to follow global Accounting Standards as well as industry specific standards.

5. Dr. T.P. Ghosal, Professor (MDP), brought out various aspects involved in `company Accounts oversight’. Reference was made to recommendation made by Naresh Chandra Committee report about setting up of quality review Boards on line of `Public company Accounting oversight Board’ (PCDAB). It was stressed that, apart from transparent financial reporting, internal system is a major factor in ensuring good corporate governance.

6. Shri B.B. Paridet, Principal Director (Commercial Audit), spoke on other aspects of financial reporting. The risk due to misstatement of financial results was highlighted like non-recognition of financial transactions, incorrect recognition, incorrect measurement and inadequate disclosures. There is duality of standards in FRS and the company law in India. Many a times, important issues remain outside the ring of materiality, thus impacting quality of financial statements.

7. Shri S.C. Vasudev, Chairman, Accounting Standards Board, ICAI, made a presentation on a “Accounting Standards setting process in India”. It was confirmed that National Advisory Committee on Accounting Standards, set up under Companies (Amendment) Act 1999 has recommended AS-1 to AS-27 (except AS 4 & AS 11), issued by ICAI, for being so notified.

NACAS has also categorized enterprises in two types – SMCs (small and medium company) and other than SMCs for the purpose of applicability of Accounting Standards.

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