Breather for start ups is finally here. The Securities and Exchange Board of India (SEBI) is planning to offer relaxation to the companies going for initial public offering. This would help the new comers to smoothly transact to the new accounting standards (Ind-AS), which is expected to begin in next financial year.
SEBI has sought the views of Institute of Chartered Accountants of India (ICAI) on the matter. ICAI and audit firms are holding discussions with the financial regulator on the implications of the new standards, a news report by The Economic Times states. The new standards are in line with International Financial Reporting Standards (IFRS).
Present rules and regulations of SEBI make it compulsory for firms to disclose the previous five years' financial statements in IPO document. . There is no clarity under the new standards whether a company needs to restate its accounts for the previous years if it goes in for IPOs immediately after the new rules come into effect. Because of this lack of clarity, market sources say, several companies have put their IPO plans on hold, informs the ET news report.
"This will be discussed by Sebi's committee on disclosures and accounting standards and if there is any lack of clarity it would be clarified," sources told the ET. Sebi didn't respond to an ET questionnaire sent on Tuesday.
ICAI president Manoj Fadnis told the financial daily, the regulator has approached the institute seeking suggestions. "The issue is whether the company should present the current year figure and the previous year figure as per Ind-AS and the figures for the three preceding financial years as per the Ind-AS or as per the existing AS, or whether there is any other alternative in this regard," he said.
"The matter is under consideration of the Accounting Standards Board of the ICAI and its suggestions would be submitted shortly."
Companies having a net worth of more than Rs 500 crore as of March 31, 2014 are required to adopt Ind-AS from April 1, 2016, and provide comparable numbers for the previous year.
In the US, when foreign private issuers were given an option to present their financial statements under IFRS, they were allowed to present only the latest two years' IFRS-compliant financial information in the offering document.