Indian Accounting Standards Current Affairs
The Reserve Bank of India (RBI) has deferred adoption of Indian Accounting Standards (Ind AS) by commercial banks for year (till April 2019) due to unpreparedness of banks to migrate to the new accounting system.
RBI has requested Government to amend Banking Regulation Act, 1949 as format of financial statements as prescribed under Schedule 3 of Act is not amenable to reporting financial statements under Ind-AS. Moreover, RBI in its assessment has found that some of banks are still not prepared to move into new accounting regime. RBI will continue to have proforma of financial statements from banks to monitor progress banks are making towards migration to Ind-AS.
Ind AS is global accounting practice that lender is mandated to adopt. The practice is on par with International Financial Reporting Standard (IFRS) 9. It governs the accounting and recording of financial transactions as well as presentation of statements such as profit and loss account and balance sheet of lender or a company.
Banks and non-banking financial companies currently follow generally accepted accounting principles (GAAP) standards. Corporate entities started complying with IndAS with effect from 1 April 2016. In February 2016, RBI had issued circular mandating commercial banks, barring regional rural banks to implement Ind AS from April 1, 2018. As part of this, RBI was asking banks to submit half-yearly returns based in Ind-AS format. Key change under new rules was need to provision for accounts based on expected loss, instead of when account turns into a non-performing asset (NPA). It is estimated that scheduled commercial banks may need up to Rs 89,000 crore towards incremental provisioning for advances while transiting to Ind-AS regime.