Mumbai, March 21, 2017

Suspecting that some of the listed companies are not complying with the new accounting standards the market regulator may start taking a closer look at the consolidated results of these companies, people in the know said.

Most Indian companies have moved from old accounting standards (Indian GAAP) to the new accounting standards—Ind-AS since April 2016. However, not many companies have incorporated all the policies and rules that are expected of them under the new accounting standards, people close to the development said.

The Securities and Exchange Board of India (Sebi) may undertake the scrutiny after the consolidated results of all the companies are announced. Some of the companies until now have been maintaining that there are not many changes because those would be included only in the consolidated results.

“If you see balance sheets of last year and this year there is absolutely no change or some minor changes in some cases. How is this possible when last year Indian companies used GAAP while this year new accounting standards (Ind-AS) apply,” asked a person close to the development.

Most of the issues could be on the account of valuations of some of the companies’ assets. Some of the assets may have to revalue and even written down or written offs in the days to come.

While the scrutiny could be across the board some sectors may get prominence. ET had on February written that even as telecom majors fight the tariff wars the industry could see a lot of write downs-- a reduction in the estimated or nominal value of an asset—of their investments due to Ind-AS.

 Industry trackers say that if rules of Ind-AS are followed as prescribed some companies would suddenly look more profitable others could see huge holes in their profits. Analysts point out that the accounting standards would have impact on company's profits, goodwill, net-worth and in some cases even market capitalisation. Indian companies are also expecting increased tax demands and are even putting aside some funds for potential litigation.

[The Economic Times]