The Telecom Regulatory Authority of India (TRAI) has published a draft study paper on the implications of adopting international financial reporting standards (IFRS) on Indian telecom service sector companies.
The paper states that the convergence of Indian accounting norms with IFRS will impact the profits of telecom companies, as they will be required to assign fair value to their assets.
In accounting, the term fair value is defined as an estimate of the potential market price of goods or service, taking into consideration factors like acquisition, production and distribution costs and replacement costs.
The paper added that this is likely to impact the income tax payable to the government by such companies.
Further, TRAI said that the convergence will impact the annual licence fee paid by the operators to the Department of Telecommunications (DoT), as there will be several changes in the method of accounting the revenue recognition of certain services.
Operators will also be required to maintain a separate set of accounts to fulfill the requirements of TRAI?s existing Accounting Separation Regulations, and under IFRS.
As per the earlier roadmap defined by the Ministry of Corporate Affairs, companies will have to prepare their accounts as per the new norm in a phased manner, beginning with companies that have a net worth of over Rs 10 billion from April 1, 2012.
Further, while scheduled commercial banks and urban cooperative banks will adopt IFRS from April 1, 2013, all insurance companies will convert their opening balance sheets with IFRS from April, 2012. Listed non-banking finance companies (NBFCs) will converge their opening books of accounts with IFRS norms from April 1, 2013.
