CONVERGENCE OF INDIAN ACCOUNTING STANDARDS WITH IFRS : PROSPECTS AND CHALLENGES

S.P. Srivastava; Sanjay Kumar Patel

S.P. Srivastava Professor and Ex-Head & Dean , Faculty of Commerce, Banaras Hindu University, Varanasi, Uttar Pradesh
Sanjay Kumar Patel Research Scholar, Faculty of Commerce, Banaras Hindu University, Varanasi, Uttar Pradesh

Keywords: INDIAN ACCOUNTING STANDARDS, INTERNATIONAL FINANCIAL REPORTING SYSTEM

Abstract

Consistent, comparable and understandable financial information is the lifeblood of commerce and making investment. The idea of global harmonization of accounting standards stems from lack of comparability of financial statements across the country. The main fascination with adoption or convergence of IFRS is sound business sense. Increasing cross border investing and proliferation of financial products have posed a challenge to companies as they faced multiple standards. Harmonisation and convergence with IFRS can greatly contribute to the efforts to build global financial reporting infrastructure. This resulted in international initiative of convergence of Accounting Standards to a common standard viz. the International Accounting Standards/ International Financial Reporting Standards (IFRS). In India the Institute of Chartered Accountants of India (ICAI) has decided to adapt IFRS for accounting periods commencing on or after April 1, 2011. This decision is an important milestone in achieving full convergence with IFRS, as India will join 109 countries which presently require or permit use of IFRS. By 2011, this number is expected to reach 150. This analytical article deals with concept, objective and benefits of convergence with IFRS and explores the way how we converge the Indian GAAP with IFRS. Problems and challenges faced in the process of convergence in Indian perspective have been thoroughly discussed. This article also focuses on IFRS prospects in Indian scenario. This article puts forward a view point that convergence will bring forth galore benefits to investors, industry, professionals and the economy as a whole. India’s blue-chip companies have begun to align their accounting standards to the International Financial Reporting Standards (IFRS), two years ahead of the mandatory time for the switchover. The list of companies includes IT firms like Wipro, Infosys Technologies and NIIT, automakers like Mahindra & Mahindra and Tata Motors, textile companies like Bombay Dyeing and pharma firm Dr Reddy’s Laboratories. This is a significant move towards the emergence of IFRS as a global accounting language.