Globalization has changed the closed economy to open economy. An upcoming economy on world economic map, India, too, decided to converge to IFRS and the adoption to IFRS will be mandatory from FY 16-17. The Institute of Chartered Accountant of India had made an initiative in this regard in the year 2007. At present the NACAS- National Advisory Committee on Accounting Standard is the principal body which in consultation with ICAI is involved in the implementation of the IFRS.
IFRS application procedure in India:
- Step 1 – IFRS impact assessment
- Step 2 – Preparation for IFRS Implementation
- Step 3 – Implementation
Who will be benefited?
- The Investors – Convergence of Indian Accounting Standards with IFRS makes accounting information more reliable, relevant, timely and comparable across different legal and economic frameworks and requirements since it would then be prepared by using a common set of accounting standards which will facilitate the investors who willing to invest in the countries apart from India. It will also develop better understanding of financial statements worldwide which increase the confidence among the people as investors.
- The Industry – The other important set of beneficiary the researchers came across is the industry which in the event of convergence with IFRS will be benefited because of some basic reasons. Firstly it will enhance confidence in the minds of the foreign investors, secondly, it decreases the burden of financial reporting, thirdly, it would make the process of preparing the individual and group financial statements easier and simplest, and the last and important one is that this will reduce cost of preparing the financial statements using different sets of accounting standards.
- Accounting Professionals – There would be initially many problems but convergence with IFRS would surely benefit the accounting professionals and it will be helpful them to sell their talent and expertise across the globe.
- The Economy – All the discussions made above explains how convergence with IFRS would help industry grow and is beneficial to the corporate entities in the country as this would make the internal and external highly consisted, and it will report improvement in the risk rating among the foreign investors. Moreover, the international comparability is also benefiting the industrial and capital markets in the country which lead to better economy across the country.
India is faced with various challenges in its pathway for convergence to IFRS:
- The biggest challenge faced is the resistance to change that is found in the mindset of the people. This resistance is found in Corporates, Government Department, and to an extent even in the stakeholders.
- Also in our Country, there is existence of various laws and reporting requirements which have to be taken care of before implementation of these IFRS. The adoption of IFRS would benefit on a large scale as it would bring India on a global level and even the accounting profession would benefit from having the updated knowledge of the International accounting world.
- Another possible challenge that can be faced is the management of the data as per the old accounting standards and the management of the new data which will be prepared on the basis of the New Indian Accounting Standard which are nothing but the converged IFRS.
Conclusion:
The ICAI is trying its best to prepare for the change as it is the need of the hour. The convergence would involve the participation of various stakeholders to ensure proper convergence. What is to be ensured is that the changes must be made in accordance with the accounting principles and practices. The Corporate world also has to be prepared for better transparency as the very purpose of adopting the IFRS is uniformity and transparency.
Tax & Investment Consultants 