International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.They are gaining popularity as global reporting standards. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external. When global companies want to compare their financial statement with Indian Companies, many problems use to arise because of the different accounting standards followed in India and elsewhere. Hence IFRS serves the purpose of ensuring uniformity of Standards at a global level so that this problem of comparison can be solved.
In Indian the responsibility of issuance and adherence to Accounting Standards is that of premier body of accounting which is Institute of Chartered Accountants of India (ICAI). With the need for diversities and complexities in the accounting world, the ICAI has started the process of conversion of its standards to confirm with the global requirement. The conversion is a long term process. In India this conversion is taken stage wise wherein each standard is first put for comments and recommendation and then the process of adapting to the said standard is done from an effective date. Also initially the conversion will take place on voluntary basis and then it will be made compulsory. In July 2014, the Finance Minister in his Budget speech proposed the adoption of the new Indian Accounting Standards (Ind AS – the converged IFRS standards) by Indian companies voluntarily from FY 2015-16 and mandatory from FY 2016-17. However this is still in pending stage. The adoption of IFRS in India can cause innumerable changes in the reporting formats. It not only affects the reporting format but also changes many concepts for the recording of accounting transaction which have been followed in India since long.
Convergence to IFRS is an excellent step taken by the ICAI as it ensures the country’s participation in accounting framework at world level. Also the convergence will result into a deep and transparent display of financial statement so that the stake holders can better understand the financial status of the Companies.
D.J.Accounts helps in convergence & maintaining the books of accounts as per IFRS.
Next I will talk about “Practical Problems in Implementing IFRS in India”
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