Implementation of IND AS
Many companies do their business on a globe, being operated on such a global scale which provides financial reports to investors and other interested parties working on similar accounting standards used on those peers may increase the company's comparability with its peer members.
There are various risks associated with this conversion to IND AS which is required to be addressed by the management. The examples of potential risk includes-
1. Failure to communicate the effects and results to the stakeholders, board of directors, audit committee, investor and analysts.
2. To maintain accounting and various reports under multiple accounting framework during the transition period.
3. Retention of key employees.
4. Excessive cost incurred due to ineffective planning, project management.
5. Missed deadlines on the conversion process.
2. Revision of accounting policies- re assessment policy will be an important element of the entire conversion project because decisions made during this phase will have an impact on the future business result.
3. Developing a format of financial statement in compliance with IND AS- Companies will have to redraft the financial statement to meet the IND AS disclosure requirement.
4. Identify and resolve data capture issues- the increased level and complexity of certain financial disclosure expected under IND AS may require significant project resources to identify and set up processes to collate the data.
2. Mandatory Phase 1- Its application is mandatory from the financial year 2016-17 (beginning from 1st April, 2017 for the companies listed or Unlisted companies with net worth of INR 500 crore or more and Holding, subsidiaries, joint ventures and associates of these companies.
2. Indirect Tax impact- current incidence of indirect tax and its computation is typically not dependent on the treatment in the financial statement. Therefore, application of IND AS may increase the possibility of litigation because its application results into significantly different accounting in many cases.
3. IT Impact- The adoption of IND AS requires change in recognition, measurement and disclosure of many items on the financial statement. Both the information and business system needs to deliver the information to comply with IND AS. accordingly modification to the IT system is not restricted just to IT modules but also includes asset management system, financial instruments and payroll instruments.
4. Internal control impact- it is important to control internal control impact as per companies act, 2013. In most cases transition to IND AS requires significant change in the entity's financial reporting framework.