It is nothing compared to the Y2K bug, but the Securities and Exchange Board of India's (SEBI) requirement to consolidate the accounts of companies will pose a challenge to several conglomerates by the end of this financial year.

Market observers estimate that around 120-odd listed companies that need to comply with SEBI's reporting requirement will find it difficult to do so.

The Accounting Standards Committee as well as the Corporate Governance Council of SEBI have recommended accounting practices in tune with international standards, including segmental reporting and consolidation of accounts.

Segment reporting includes reporting of financial information about different types of products and services in different geographical areas. Consolidation would mean the rationalised total profit and loss of a listed company, canceling out transaction within the conglomerate of which the company is a part of.

SEBI's new requirements also include addressing varying share-holding pattern within a reporting period, protection of minority Interests and so on. Foreign and multi-currency transactions pose another challenge. The question is how quickly the group can meet these requirements and chalk out a consolidated report and repeat such reporting every quarter.

These new accounting standards are expected to significantly increase the disclosures of financial information by companies. In effect, the customer, share-holder or any other stakeholder, will be able to get what is described a line-by-line, rationalised view of the company's balance sheet.

"The awareness is there, but the effort it will take is underestimated," said Pradeep Erinjery, director of Mumbai-based Thirdware Solution Limited, a firm specialising in CRM and supply chain management. "As they are doing it, the companies are realising that it is taking much more effort than what they thought it would," he said while on a recent visit to Bangalore.

"You are better off with a tool," says Erinjery, who claims Hyperion Enterprise a US-made tool that Thirdware is pushing in India, receives ready takers. Thirdware site (www.tspl.com) claims that about 60 per cent of the Fortune 100 use Enterprise.

There is likely to be competition and attempts at cheaper indigenous innovation in this field even as listed companies are increasingly trying to give reliable detailed information to shareholders, consistent with their financial forecasts.

But then, with the current traditional book keeping practices and the complex structuring of many Indian conglomerates will make consolidation a tough job for any tool-maker.

As a software expert would put it figuratively, you will need to provide a whole picture of the financial information and the ability to slice this picture and view segments and independent clusters. Ideally, it should be like a three-dimensional scan image.

And it is a tough task.