India is trying to move to the Indian IFRS accounting standards popularly known as Ind AS. This move will not be easy considering that Ind AS is rather different from the current Indian GAAP standards. Here are some highlights in the differences between the two standards that are bound to make the migration challenging.
Generally, the Indian GAAP taxonomy has an estimation of 2500 elements. This is a small figure compared to the Ind AS element count of 6800.
Scope of Tagging
Indian GAAP requires only 300 mandatory elements to be tagged. Under IGAAP, the accounting treatment of acquisition varies widely depending on the legal structure which affects the reported amount of goodwill. This is entirely different with Ind AS. This is because the MCA has expanded the scope of tagging where there are no minimum tagging requirements. Under Ind AS, it is not relevant whether an acquisition is a legal entity or even a group asset as long as it is an acquired asset.
In the interest of data transparency, there are more elaborate disclosures by corporations to the MCA in the Ind AS taxonomy than there are in Indian GAAP. In fact, in INGAAP additional disclosures such as rate reconciliation, tax holidays and even joint ventures are not required. In IND AS however, the MCA validation tool validates more than 800 mandatory fields of information. This ensures accountable disclosures while also increasing the complexity of tagging.
Unique records such as DIN/PAN/CIN/SRN are a necessary provision in the case of Ind AS. Dummy records are unacceptable with all records being centralised. This makes validation more robust considering there is an interlinking of different government databases. This is different in the case of Indian GAAP with dummy records being acceptable without the requisite need of providing unique records.
Why is outsourcing a better option at this stage?
There are various benefits that come with outsourcing the audit process at this stage. Outsourcing ensures an in-depth analysis of the operations and their compliance with both Ind AS and Indian GAAP by the service provider. They also ensure an unbiased appraisal, which is essential in generating new ideas and proposals for better performance. External auditors also reduce the costs of auditing. The certified consultants are skilled enough and do not require training fixed salary, thus saving costs and resources hugely.
Clearly, Ind AS is vastly different from Indian GAAP. These differences make the switch a daunting task. However, it’s essential to note that in case of cost audits, it is mandatory to tag the product headings as per the Central Excise Act with other relevant information such as net worth, net revenue as per cost books. This demonstrates the necessity of outsourcing the cost auditing to a certified consultant who have demonstrable knowledge of all the aspects involved. Therefore, guidance from knowledge experts is highly recommended at this transitional stage.