The twelvemonth 2000 was important for International Accounting Standards ( IAS ) , now known as International Financial Reporting Standards ( IFRSs ) . The International organisation of Securities Commission officially accepted the IAS nucleus criterions as a footing of cross boundary line naming globally.

In June 2000, the European Commission passed a demand for all listed companies in the European Union to fix their Amalgamate Financial Statements utilizing IFRS from the fiscal old ages get downing 2005. Since 2005, the acceptableness of IFRS has increased enormously.

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There are around 125 states across the universe where IFRS is either require or permitted.

IFRS and India

The issue of Convergence with IFRS has gained important impulse in India. Currently, the Accounting Standard Board ( ASB ) of the Institute of Chartered Accountants of India ( ICAI ) formulates Accounting criterions based on IFRS. The Accounting criterions issued by ICAI diverted from IFRS in order to guarantee consistence with the legal, regulative and economic environments of India.

In May 2006, the council of ICAI expressed the position that IFRS may be adopted in full at a hereafter day of the month, at least for listed and big entities. ASB decide to organize an IFRS TASK force in order to accomplishing Convergence with IFRS and puting down a route map for accomplishing convergence with IFRS. With an aim to guarantee smooth passage to IFRS from 1 April 2011, ICAI is taking up the affair of Convergence with IFRS with the National Advisory Committee on Accounting Standard ( NACAS ) and other regulators including Reserve Bank of India ( RBI ) , Insurance Regulatory and Development Authority ( IRDA ) and The Securities and Exchange Board of India ( SEBI ) . Acknowledging India ‘s committedness to convergence with IFRS, the European Union has already allowed entities to utilize Indian GAAP for naming on a European security market without rapprochement through to 2011 and if the convergence program is achieved so to go on to make so after 2011.

Reasons for the convergence into IFRSs

Reason for the Convergence into IFRSs is that the capital markets become progressively planetary in nature ; more and more investors see the demand for a common set of International Accounting Standards.

“ Concept Paper ” on Convergence with IFRSs in India

In general footings, “ Convergence ” means to accomplish harmoniousness with IFRSs. But India ‘s “ Concept Paper on convergence ” is more exactly is to plan and keep National Accounting Standards in the manner that fiscal statements prepared in conformity with National criterions will besides compliance with IFRSs where as IAS 1, Presentation of Financial Statements states that “ Fiscal Statements shall non be described as following with IFRSs unless they comply with all the demands of IFRSs ” . Therefore, India will merely be allowed to utilize the word “ Conformity ” with IFRSs when their National Accounting Standards with have same word to word with all the demands of IFRSs.

Summary of Convergence Strategy

Will all entities be required to follow IFRSs?

The ICAI ‘s Concept Paper has expressed the position that IFRSs should be adopted for the public involvement entities such as listed entities, Banks, Insurance entities and big sized entities from the accounting periods get downing on or after 1 April 2011.

In regard of Small and Medium Sized Entities ( SMEs ) , the ICAI has indicated that separate criterion may be formulated based on the IFRS for SMEs.

Benefits of Convergence to IFRSs

Improve entree to International capital markets – Many Indian entities are spread outing or doing important acquisitions globally, for which big capital is required. The bulk of stock exchanges require fiscal information prepared under IFRS. Migration to IFRS will enable Indian entities to hold entree to international capital markets.

Lower cost of capital – Convergence to IFRS will take down the cost of capital of raising financess as it will extinguish the demand of fixing a double set of fiscal statements. It will besides cut down Accountant ‘s fees, cut down hazard premium and entree to major capital market as IFRS is globally acceptable.

Escape multiple describing – Adoption of IFRSs, by all group entities, will enable company directions to see all constituents of the group on one fiscal describing platform. This will extinguish the demand for multiple studies and important accommodation for fixing amalgamate fiscal statements or registering fiscal statements in different stock exchanges.

Reflects true value of acquisitions – In Indian GAAP, concern combinations, with few exclusions, are recorded at transporting values instead than just values of net assets acquired. Purchase consideration paid for intangible assets non recorded in the acquirer ‘s book is normally non reflected individually in the fiscal statements ; alternatively the sum gets added to goodwill. Hence, the true value of the concern combination is non reflected in the fiscal statements. IFRS will get the better of this defect, as it mandates accounting for net assets taken over in a concern combination at just value. It besides requires acknowledgment of intangible assets, even if they have non been recorded in the acquiree ‘s fiscal statements.

Challenges to Convergence to IFRSs

Training – If IFRS has to be uniformly understood and systematically applied, developing demand of all stakeholders, include Chief Financial officer, Auditors, Audit commissions, Teachers, Students, Analysts, Regulators and Tax governments need to addressed. It is expressed that IFRS is be introduced as a full topic in Universities and in the Chartered Accountancy course of study.

Information Systems – Fiscal accounting and describing systems must be able to bring forth consistent informations for describing fiscal information. The systems must besides be capable of capturing new information for needed revelations, such as section information, just values of fiscal instruments and related party minutess. Entities need to heighten their IT security in order to present information in conformity with IFRS and minimise the hazard of concern break, in peculiar to turn to the hazard of fraud, informations corruptness etc.

Taxes – IFRS convergence will hold a important impact on fiscal statements and revenue enhancement liabilities. Tax governments should guarantee that there is lucidity in revenue enhancement intervention of points originating from convergence to IFRS. For illustration, will authorities governments revenue enhancement unfulfilled additions originating out of the accounting required by the criterions on fiscal instruments? The entities will hold to see hazards involved with Tax authorization and other regulative issues.

Communication – IFRS may be significantly alteration reported net incomes and assorted public presentation indexs. Pull offing market outlooks and educating analysts will hence be critical. A company ‘s direction must understand the differences in the manner the entity ‘s public presentation will be viewed, both internally and in the market topographic point agree on cardinal information to be delivered to investors and stakeholders. For illustration, Reported net incomes may be different due to increase usage of just values, and the limitation on bing patterns such as hedge accounting. Therefore, the indexs for measuring both concern and executive public presentation will necessitate to be address.

Management compensation and debt compacts – The sum of compensation calculated and paid under public presentation based executive, and employee compensation programs may be materially different under IFRS, as the entity ‘s fiscal consequences may be well different. Significant alterations to the program may be required honoring an activity that contributes to an entity ‘s success, with in the new government. Re-negotiating contracts that referenced reported accounting sums, such as bank compacts or foreign currency exchangeable bonds. Therefore entities will hold to use these alterations in order to conformity with IFRS.

Impact on cardinal industries in India





Retail etc ( D’Souza et al. , 2010, p. 35 )

First clip acceptance of IFRS

Scope of IFRS 1

First- clip acceptance timeline/key day of the months

Optional freedoms from the demands of certain IFRS

Presentation and revelation etc ( Pricewaterhousecoopers, 2010a, p. 3 )

Impact of Practical differences

Presentation of Financial Statements

Business Combinations

Group Histories

Fiscal Instruments

Income Taxes

Damage of assets

Related party revelation etc ( D’Souza et al. , 2010, p. 7 )

Critical success factors for IFRS transition undertakings


Leadership communicating


Project direction etc ( KPMG, 2008, p. 26 )

Comparison of IFRS and Indian GAAP

Identify the similarity and difference between Indian GAAP and IFRS Accounting interventions.

Accounting interventions such as Statement of Financial Position, Inventories, Statement of Cash flows, Accounting Policies, Change in Accounting estimations and mistakes etc ( Pricewaterhousecoopers, 2010b, p. 15 )


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