A large number of listed companies may be referred to the BIFR in 2014 following the implementation of International Financial Reporting Standard (IFRS) for all listed entities, financial experts feel. IFRS would become the norm for level-1 companies having a turnover of more than Rs 1,000 crore from April 2011. LSI Financial Services MD Rajya V Kajaria said over 25-30% companies could be affected once IFRS is rolled out fully. LSI is working on the impact of IFRS on Indian companies.
Kajaria said under IFRS, redeemable preference shares would be treated as a liability in the balance sheet instead of capital. "This structural change would significantly alter the debt-equity ratio of many firms. As a fallout, the net worth of many companies will go down," he added.
LSI director P K Ghosh said depreciation norms in IFRS, too, are different and could impact profitability. "In IFRS, the depreciation is more subjective. For example, depreciation of an aircraft and its engine will be different. So it will have an impact," he added.
CD Equisearch director Rajesh Agarwal said the change in debt-equity ratio would impact the borrowing capacity of many companies. Arijit Chakraborty, joint managing partner of Dutta Sarkar & Co also agreed that there would be a major impact on the net worth of Indian companies when IFRS would be rolled out fully.
Chakraborty said as per the new BIFR regulation, if the net worth of a company is eroded by even 50% then that has to be reported to it. "In 2014, a lot of companies may find their net worth eroded by more than 50% if they do not alter the preference share instrument within this timeframe," he added.
source: http://timesofindia.indiatimes.com/biz/india-business/IFRS-may-raise-BIFR-filings/articleshow/6132735.cms
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