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New accounting norms change net worth of BSE 100 firms

Via Economic Times : If you thought you should buy shares of top listed companies because its profitability or net worth has gone up, think again.

Most of the companies in BSE 100 saw a change in their net worth, revenues and net profits due to the change in accounting methodology, according to a research by EY India on new accounting standards. Indian companies with net worth more than Rs 250 crore have shifted new accounting standards—Ind-AS—which are based on global standards IFRS.

According to EY, 22% of the top 100 companies saw change of more than 20% in their net worth while 56% of the companies saw a change in their net worth by less than 10%. The remaining companies in the BSE 100 saw a change of anywhere between 10-20% in their net worth.

“The transition to Ind-AS has been challenging not only for companies, but also for auditors. The review of management judgements, estimates and alternatives calls for extensive auditor involvement early on during the transition.

Added to this, changes in internal controls, systems and business processes will have significant audit implications for many companies,” said Sudhir Soni, partner in an Indian member firm of EY Global.

The research pointed out that 20% of the companies saw a 20% to 100% change in their net profit, while 72% of the companies witnessed less than 10% change in their net profit.

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