In February 2011, the Ministry of Corporate Affairs (‘MCA’) issued a press release stating that 35 Indian Accounting Standards (‘Ind AS’) converged with IFRS are being notified and placed on the its website but effective date of the Ind AS is to be notified at a later date, after various issues (including tax related issues) are resolved within various departments of the government.

In early 2010, the MCA issued various press releases on IFRS roadmap and convergence plan for India specifying the convergence date to be 1st April, 2011 through 2014 for select Indian companies. The highlights and specific timelines as per the MCA press release are given below in the tab ‘Proposed Roadmap’.

At present, it appears that the timeline in the Roadmap is no longer valid for Phase I companies. The new implementation date for Ind AS is awaited from the MCA. It is unclear if the MCA will release a fresh Roadmap or just amend the implementation date for Phase I companies.

Conversion is much more than a technical accounting issue. IFRS or Ind AS may significantly affect any-number of a company’s day-to-day operations and may even impact the reported profitability of the business itself. Conversion brings a one-time opportunity to comprehensively reassess financial reporting and take ‘a clean sheet of paper’ approach to financial policies and processes.

Understanding IFRS or Ind AS and its implications is a business imperative for Indian companies. Take advantage of the resources that PwC has developed to increase your knowledge.

2.       The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. The LLP form would enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small enterprises and for investment by venture capital.

3.            keeping in mind the need of the day, the Parliament enacted the Limited Liability Partnership Act, 2008 which received the assent of the President on 7th January,2009.

The salient features of the LLP Act 2008 inter alia are as follows: -
The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.  The LLP will have perpetual succession;

(ii)      The mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP and the partners subject to the provisions of the LLP Act 2008 .  The act provides flexibility to devise the agreement as per their choice.  In the absence of any such agreement, the mutual rights and duties shall be governed by the provisions of proposed the LLP Act;

(iii)     The LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both tangible and intangible in nature. No partner would be liable on account of the independent or un-authorized actions of other partners or their misconduct. The liabilities of the LLP and partners who are found to have acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP;

(iv)     Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India. The duties and obligations of Designated Partners shall be as provided in the law;

(v)      The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs.  A statement of accounts and solvency shall be filed by every LLP with the Registrar every year.  The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government;

(vi)     The Central Government have powers to investigate the affairs of an LLP, if required, by appointment of competent Inspector for the purpose;

(vii)    The compromise or arrangement including merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act 2008;

(viii)   A firm, private company or an unlisted public company is allowed to be converted into LLP in accordance with the provisions of the Act. Upon such conversion, on and from the date of certificate of registration issued by the Registrar in this regard, the effects of the conversion shall be such as are specified in the LLP Act. On and from the date of registration specified in the certificate of registration, all tangible (moveable or immoveable) and intangible property vested in the firm or the company, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, and the whole of the undertaking of the firm or the company,  shall be transferred to and shall vest in the LLP without further assurance, act or deed and the firm or the company,  shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be;

(ix)     The winding up of the LLP may be either voluntary or by the Tribunal to be established under the Companies Act, 1956. Till the Tribunal is established, the power in this regard has been given to the High Court;

(x)      The LLP Act 2008 confers powers on the Central Government to apply provisions of the Companies Act, 1956 as appropriate, by notification with such changes or modifications as deemed necessary.  However, such notifications shall be laid in draft before each House of Parliament for a total period of 30 days and shall be subject to any modification as may be approved by both Houses;

(xi)     The Indian Partnership Act, 1932 shall not be applicable to LLPs.

This Circular marks an important step in ensuring XBRL compliance for financial statements filed by Indian companies, and is part of a series of XBRL initiatives by various regulators.

In the initial phase, the MCA mandate applies to:

• All companies listed in India and their subsidiaries, including overseas subsidiaries

• All companies having a paid up capital of INR 5 crores or  above, or a turnover of INR 100 crores or above

The financial statements required to be filed in the XBRL format would be based on the existing Schedule VI of the Indian Companies Act, and the currently prevailing Indian Accounting Standards. Accordingly, XBRL implementation does not change any requirements relating to preparation of manner in which the financial statements will be transmitted to the regulators. A filing deadline of 30 September 2011 has been notified.

Failure to adhere to the timeline may result in imposition of additional filing fees. statements, but if the reader wants to have all “Revenue” references and related information collated in one place, they would need to do so manually.

XBRL enables the user’s computer to “talk” to the financial  statements and analyse a lot of such information. Generally management of a company, users of financial statement or regulators would go through a time-consuming process of collation if they want to compare their financial performance with those of peer-group companies. This can be facilitated if  all companies are on XBRL. XBRL formatting can be done for financial and non-financial data.

For example:

• Financial statements

• Supplier data

• Customer application forms

• Project information

• Employee data

• Regulatory submissions

• Other Management Information Systems data

The mandatory use of XBRL is thus also an opportunity for Indian companies to determine how XBRL can be optimally  used for internal business reporting and analysis. Through this approach, companies can use this regulatory change as a trigger for automating collation and analysis of identified internal data. Our experience indicates that this can result in benefits including cost savings, improvement in the speed of collating and analyzing data, improvement in the reliability and accuracy of data, and an overall improvement in the quality of

information for decision making purposes.

How does data become XBRL compliant

XBRL makes the data machine readable, with the help of two documents – taxonomy and instance document. Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, companies need to map their financial statements, and generate a valid XBRL instance document. This XBRL document thus becomes machine readable and can be automatically be read and analysed by users.

Implications for Indian companies

Companies need to quickly gear-up to this new reporting  challenge. Some of the key challenges that companies might encounter as they adopt XBRL reporting are:

• Requirement of training staff to understand XBRL and how   it needs to be implemented including matters like timely  tagging and validation processes

• The software tool to be used for the purpose of tagging the financial statements

• The first-time efforts for tagging the financial statements correctly to the relevant taxonomies

• Smooth and timely closure of reporting within the prescribed timelines.