The International Financial Reporting Standards (IFRS) journey worldwide in its existing avatar actually started in 2001 when International Accounting Standards Committee was reconstituted to an International Accounting Standards board (IASB). The Journey in India started about five/six years ago and culminated in the Institute of Chartered Accountants of India releasing the IFRS concept note in October 2007.
Rhapsody started its IFRS journey in the winter of 2008 and formally commenced its operations in the summer of 2009.
We at rhapsody believed right from 2008/2009days that IFRS conversion/implementation is imminent. Right through the recent times when many were raising various issues pertaining to the implementation of IFRS and it’s after/ side effects, Rhapsody had made its stand very clear to all associated with it that, the Government of India is committed to IFRS in which ever form and is unlikely to postpone.
Rhapsody’s thought leadership in the areas of IFRS conversion and Implementation in India is as follows:
IFRS applicability worldwide is attempting to have one (or at least similar) set of accounting principles world-wide as compared to the existing varying practices spanning, at one end of the spectrum, rule based standards in the US to absolutely conservative standards in some parts of the world like Germany (till the early part of the last decade) to generally principle based rules and standards which until recently had reminiscences of the license raj in countries like India to principle based standards under IFRS now. Some would say this is a political movement (between the US and Europe)and some that this is the need of the hour (considering the recent financial debacle in most parts of the world).
Our take on the matter of IFRS is that, the basic principles should remain consistent all across the globe, so that in accounting parlance the way sales or loans or fixed assets/ property plant and equipment is accounted for (recognition, measurement and disclosures) should remain as consistent or similar as possible whether you are in US, Europe, South east Asia, India etc reducing, arbitrage and its ensuing side effects.
This is of course is easier said than done considering the various political and economic backgrounds and conditions that various economies in the world are currently from/in.
This is also the primary reason for the various discussions and controversies in India surrounding the IFRS conversion/implementation in the recent past.
So, on the one hand you have the proponents of IFRS in India who believe in the story that IFRS is good for our country considering that in the last decade or so, Indian MNCs have come to form and are now acquiring and growing businesses outside. Also the fact that Indian Subsidiaries of foreign majors are becoming large and hence the parent would now want the Indian subsidiaries books on more universally acceptable platforms like IFRS.
Then you have the regulators, the standard setters and the government which over time (4 years almost) now have come to the conclusion that IFRS is a must or necessary but what one might say in a diluted form with some significant and some not so significant ‘carve outs’ or variations from the IFRS as released by IASB. This although may not clearly be acceptable to IASB , but is at least the first step for a huge and complex regulatory, economic and political set up like India to shift to. Regulators also are of the view that there is no solid reason for not bringing IFRS along, to the point that the Honourable, Cabinet minister in charge for the Ministry of Corporate Affairs has gone on record to say that the government will not postpone IFRS conversion just because people are lazy or tardy. Then of course you have the Chairman of Public Accounts Committee (PAC- who technically has no locus standi on this matter) writing to the Prime Minister’s office on the matter and suggesting postponement.
Then you have the opponents of IFRS who are justifying how IFRS is not useful with reasons ranging from India Inc is not ready (nobody knows why) to we have not yet understood the various implications of IFRS (suddenly Indian Professionals and business men have become people with below average IQ not to understand IFRS for the last 3/4 years) to whether we are comfortable in disclosing a lot of areas which hitherto do not require disclosures (a mindset which has primarily arisen during the License raj) to why can’t we (India) postpone considering that US has decided to adopt or convert to IFRS only by 2015.
Lastly, there is a point of view of purists and idealists and some in investor community which states that as it is India has decided to convert (meaning potential carve outs and dilution of IFRS) and that too in phases over 4 years and even thereafter a G 20 nation like India is not able to even commence of the process as scheduled, is India really mentally and mindset wise geared up for being part of the big club.
Whichever category one belongs to, at Rhapsody we believe that in whichever form, IFRS is here to stay and is imminent. Form may be initially diluted but eventually, India Inc may not be able to escape this. Infact the only way India will be able to influence IASB with the kind of provisions that IFRS should contain to suit the business environment in countries like India, would be to be part of the system and gain permanent membership to IASB. We believe that, even companies not being covered by IFRS either initially or eventually by phase III will not escape most concepts prevalent in IFRS as the Indian standard setters shall be adopting this in one form or the other over the next half a decade.
We at Rhapsody, therefore strongly believe that having had extensive exposure to IFRS (as a company for almost, the last two years and for the top management for more than 6 years), that understanding IFRS is a mindset issue (and is somewhat like developing a taste for wine). IFRS, thanks to the BIG 4 has been made out to be a very complicated set of standards and they have been responsible for creating fear psychosis so much so that some business houses have probably starting believing them.
Worse, the Chartered Accountancy profession in India which largely comprises small and medium sized firms and also some reasonable large Indian firms were taken aback and off guard with IFRS coming in as they probably did not spend enough resources (time and cost) in either trainings or gearing up for the situation. They now fear that the BIG 4 shall take bulk of the business. The same was the case with the finance functions in most corporate (with some still not getting into what IFRS really is and hoping for a postponement !). Nor did most of the people (unlike at Rhapsody) have the foresight to see IFRS related services as a viable business proposition outside the BIG 4.
While the world was busy either creating fear in the minds of businesses or figuring out what IFRS is or trying to get trained or hoping for a postponement, we at Rhapsody were busy developing intellectual property in the areas of IFRS tools, training material and industry specific research material, which we believe shall give us the edge over most players in the years to come.
At Rhapsody, we have been and shall continue to be providing ‘simple to understand’ solutions and efficient and cost effective IFRS related advisory services for the Indian mindset. Our experience has been that there is definitely a viable option to the BIG 4 in the areas of IFRS implementation as well as IFRS trainings at least for the next half a decade if not more.
In this regard we at Rhapsody are continuously working towards developing and providing IFRS advisory and training tools and solutions for both the industry as well as people in the profession.
Our prime objective is that knowledge should be reachable both in terms of speed and cost in the most effective manner to the end users and no ‘knowledge hoarding’ is acceptable or should be permitted or will ever be possible in the scheme of things that our ‘universe’ is.
We consider that at Rhapsody, we are light years ahead in terms of thought leadership both technically and sound business sense wise and know that Rhapsody shall be a force to reckon with in the next decade.
About Company – Rhapsody, incorporated in 2009 is an accounting KPO (Knowledge Process Outsourcing) largely focusing on IFRS practice and other areas. The broad level services currently offered are IFRS Practice/GAAP accounting, IFRS Education and training and IFRS Corporate and Business Advisory.