Indias Roadmap of Convergence to International Financial Reporting Standards (IFRS)

Abstract

The International Accounting Standards Board (IASB) is a standalone privately funded accounting standard setting body established to develop global standards of financial reporting. It is the successor to the International Accounting Standard Committee (IASC), which was created in 1973 to develop International Accounting Standards (IAS). In 2001 , IASB assumed the responsibility of setting accounting standards from IASC. Since then, the accounting standards that the IASB develops and approves have been known as International Financial Reporting Standards (IFRS). IFRS, with world-wide acceptance of principles based reporting standards, has become the new 'principle' management mantra. Management defines success as being nonconformist and, that is, what IFRS focuses on. IFRS implementing body is also clear that there are multiple ways of challenging the status quo. Thus, different countries who have adopted IFRS in different ways, often embed local cultures. Therefore, there are no standard rules; only broad principles which define the outer boundary of accounting. However, the way companies and accounting firms work to overcome the issues that will surface with time is a matter of concern. This will portray the adaptability rate and convenience in adoption ofIFRS in India. A lot of ground is yet to be covered to align and harmonize legislative changes with various enactments, and the major challenge is differences in the underlying conceptual framework, and lack of trained people. Hence, the pace of regulatory changes has to gain momentum to address these challenges, and move ahead with a phased implementation ofIFRS and convergence. In an era of globalization, wherever companies operate globally, the expectations of the capital providers are multiple and faceted. They increasingly expect financial information to be presented in a comprehensive, transparent and commonly understood format. Currently, more than 100 countries require or allow the adoption of IFRS. For instance, all the listed European companies adopted IFRS in the year 2005. Pakistan is already reporting as per IFRS principles. Canada adopted IFRS by January 2011; Japan will converge by 2016; United States by 2014 and India was to converge by April 1, 2011, but deferred for one-year, vide its press release dated February 25, 2011. In 2011, the number of countries requiring or permitting IFRS was expected to reach 150, and at present, the focus of IFRS Implementation in most developed countries is on listed companies. The IASB cooperates with national accounting standards to achieve convergence in accounting standards around the world.