The Sarbanes-Oxley legislation may be percieved as driving away businesses from the US, but it has a surprising number of takers in India Inc.
MUMBAI: The Sarbanes-Oxley legislation may be percieved as driving away businesses from the US, but it has a surprising number of takers in India Inc.
That is one of the findings of the Ernst &Young India CFO Survey, which includes views of 125 CFOs, of which 78% represent listed companies.
In the survey, 43% of CFOs said the country should follow Sarbanes-Oxley (SOX)-like model for internal controls and 56% felt the benefit from corporate governance requirement outweighs compliance costs.
About 60% of the CFOs believed that regulatory compliance is not a burden. But while 65% CFOs were satisfied with auditors’ independence related regulations, only 24% are completely convinced about it.
A majority of CFOs said their roles were now more skewed towards strategic planning and business development than earlier. Maintaining the organisation’s accounting was just one part of their routine, was the majority opinion.
There was overwhelming support (81%) for the existing regime of corporate governance certification by CFO/CEO, despite its perceived high level of risk.
Almost all CFOs backed the need to have a stable platform of GAAP. They felt frequent changes to GAAP was detrimental to business. 64% of CFOs want alternative accounting treatments to be eliminated to achieve consistency. In the survey, 42% respondents “strongly” recommended and 34% recommended industry-specific accounting standards, which are virtually absent. Electronic dissemination of financial information found favour with 75% CFOs, who felt that it was time their companies sent soft copies of financial statements to investors. And a majority (92%) of respondents considered e-filing under MCA-21 as an innovative and successful step undertaken by the ministry of company affairs.
A big chunk of CFOs were in favour of quarterly reporting. There was consensus that the ICAI should be the sole standard-setter and multiple standard-setters or regulators were unnecessary There was a divided house on presenting only consolidated financial statements instead of financial statements of all constituents in the annual report. Opinion was also divided on whether sending abridged financial statements to shareholders was a better option over detailed financial statements.
Many CFOs regarded the regulatory review of financial statements in India as inadequate. 70% of CFOs wanted ICAI, rather than Schedule VI, to set forth disclosure requirements.
There was strong support for the need to adopt more non-GAAP measures. About 79% CFOs encouraged adoption of Economic Value Added Analysis, 62% favoured CSR statements and 54% supported the use of environmental reporting as key Non-GAAP measures to be included in annual reports. CFOs largely agreed that social reporting provides useful information to stakeholders, investors and regulators.
All CFOs agreed that the Indian GAAP is sufficient, relevant and clear even in comparison to global standards. While 79% respondents believed that Indian GAAP met the needs of management to provide robust financial reports, 76% CFOs believed that it meets the needs of stakeholders to obtain financial information as well. The desire to converge with international norms in accounting procedures was expressed by 95% of the CFOs surveyed. Alignment with International Financial Reporting Standards (IFRS) was favoured by 64% CFOs, whereas 31% CFOs were in favour of convergence with US GAAP. 86% of the CFOs favoured convergence of tax laws and accounting standards.
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