MEDIA RELEASE PR35772
New Survey Shows Indian Companies Struggling With Changes in Financial Reporting
MUMBAI, Aug. 20 /PRNewswire-AsiaNet/ --
Only minority of financial executives understand major differences between old
and new standards
According to a newly released survey by Resources Global Professionals India, only 27 per cent of blue
chip foreign and Indian multi-national corporations say they are prepared for the conversion to the new
International Financial Reporting Standards (IFRS) from the current Indian Generally Accepted Accounting
Principles (GAAP). Moreover, nearly 60 per cent report that critical milestones and success factors for a clean
and cost-effective conversion have either been overlooked or are not properly understood.
To stay competitive on the global stage, blue chip foreign and Indian multi-national corporations must
change the way they report to stakeholders by preparing for what is considered to be the biggest change in
reporting history. The transition to the new accounting standards is expected to be complete by 1 April, 2011.
"IFRS is the equivalent of a tidal wave that is sweeping across the globe at a rapid pace. Indian companies
will need to learn to swim with their global counterparts in IFRS waters," explains Mahesh Krishnamurti,
Managing Director of Resources Global Professionals' India practice. "It is a matter of developing an
implementation plan, and following through on that plan, sticking to prescribed milestones and deadlines. That
is the only way to meet the challenge. This is how we intend to help our clients."
Krishnamurti further explains that the survey was undertaken to measure the level of understanding of and
preparation for IFRS implementation among India's finance professionals.
"It is important for us to understand how the IFRS implementation will affect our clients," Krishnamurti said.
"The survey gave us insights into the challenges our clients will face and how we can help them. In fact, many
Indian companies that are subsidiaries of US companies are conflicted. On the one hand, they are required to
convert based on the fact that they clearly trigger various criteria stipulated by Indian authorities. On the other
hand, they are also waiting for further guidance and direction from their US parent companies that are
operating under a different deadline of 1 January, 2014 in the US. This should create some serious concerns
around their ability to produce comparative figures from the year commencing 1 April, 2010, which is only
seven months away."
The survey was conducted in spring/summer 2009. Participants included senior-level finance executives at
large Indian and India-based foreign multinational companies. 40 per cent of respondents were US-listed
companies, 27 per cent were India-listed, 18 per cent were unlisted, and 12 per cent were listed on exchanges
in the US and elsewhere.
SURVEY HIGHLIGHTS
Scope of impact on corporations
"The transition period of converging standards in accounting practices and the effort required are compared
to that of Sarbanes-Oxley (SOX)" said Krishnamurti. "Significant planning and education is required to
understand, implement and apply the new standards. This is particularly true for large conglomerates that
house very different and distinct businesses under the same roof. Large Indian enterprises typically operate
this way, with shipping, manufacturing, publishing, and apparel businesses all being part of the same portfolio,
for example. You can imagine the very different implications that IFRS is likely to have on each of those
individual businesses, not to mention the implications at the consolidated group level."
A key finding in the survey was that 70 per cent of the respondents have not assessed, even on a
preliminary basis, the financial and accounting impact of IFRS on their reported results. This means
stakeholders could be in for a surprise when IFRS statements are eventually prepared.
The European experience
According to Krishnamurti, several countries have already made the change to IFRS and lessons can be
drawn from their experience.
"Companies should not underestimate what's involved. Outcomes of the European implementation of IFRS
provide noteworthy learning," said Krishnamurti.
He points to several insights specifically:
- Poorly planned and executed conversions typically resulted in
significant overspends on the implementation, as well as nasty
surprises.
- Most companies found it more challenging to explain their IFRS
results to shareholders, not to mention clear internal communications
and expectations-setting vis-a-vis divisional performance results
- The average length of annual financial statements increased
significantly
- After initial release of IFRS information some companies saw share
prices move in either direction, and this was clearly a function of
both the impact on results as well as proactive communication with
stakeholders.
- A conversion of this nature goes well beyond accounting restatements -
-- it is transformational and could well alter internal incentive and
measurement schemes and behaviours.
"There is no short cut or quick way through the process," Krishnamurti explains. "The experience from
Europe tells us that it was more than an accounting exercise in terms of its magnitude. Support and whole-
hearted buy-in from senior management was key at the outset and investing in training finance staff and
managing shareholder expectations were critical to a successful transition."
ABOUT RESOURCES GLOBAL PROFESSIONALS
Resources Global Professionals India is a professional services and consulting firm that is a wholly owned
subsidiary of the US parent company Resources Global Professionals. The company's India operations are
headquartered in Mumbai, supported by a second office in Bangalore. Its unique value proposition is to
provide clients with "on-demand-expertise-and-capacity" anywhere in India and globally at highly competitive
rates -- in Finance and Accounts, Risk Advisory Services, Information Management, Legal Services, Supply
Chain management and Human Capital Management. Resources Global Professionals India, like its parent
company, does not provide attest or certification services, and therefore operates with a high degree of
independence on client projects.
Resources Global Professionals, the operating subsidiary of Resources Connection, Inc. (Nasdaq: RECN),
is a multinational professional services firm that helps business leaders execute internal initiatives. Partnering
with business leaders, Resources drives internal change across all parts of a global enterprise - finance and
accounting, information management, internal audit, human capital, legal services and supply chain
management. Resources Global was founded in 1996 within a Big Four accounting firm; today, a publicly
traded company with over 2,800 professionals, from more than 80 practice offices, Resources serves 2,400
clients around the world every year.
SOURCE: Resources Global Professionals
CONTACT: Revathi Shivakumar,
+91-9820120707, or
Chitra Hiremat,
+91-9821411682, or
Jeff Bellows,
+1-617-897-0350,
jeff.bellows@resources-us.com,
all of Resources Global Professionals
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