IFRS and India

IFRS is an accounting framework that establishes recognition, measurement, presentation

and disclosure requirements relating to transactions and events that are reflected in the financial
statements.
IFRS was developed by International Accounting Standards Board (IASB) in the public
interest to provide a single set of high quality global accounting standards. The application of
IFRS would lead to a better financial comparison and enhanced transparency in financial
reporting. IFRS are increasingly being recognized as global reporting standards.

In the scenario of globalization India cannot isolate itself from the developments taking
place globally. As the world globalizes, it has become imperative for India also to make a formal
strategy for convergence with IFRS with the objective to harmonize with the globally accepted
accounting standards.

The use of International Financial Reporting Standards (IFRS) as a universal financial

reporting language is gaining momentum across the globe, especially as compared to a few years
ago when a number of different national accounting standards existed. More than 100 countries
now require or allow use of IFRS and by 2011 the number is expected to increase to 150.Some
of the major countries that are seeking to converge/adopt IFRS by 2011 include Canada, Korea,
India and Brazil. The last two years have also seen significant momentum in the United States on
converging from US GAAP to IFRS. The momentum started with the US Securities and
Exchange Commission allowing foreign companies listed in the US to file financial statements
prepared in accordance with IFRS(without a reconciliation to US GAAP) and continued with a
proposal to evaluate IFRS convergence for all US Listed companies between 2014 and 2016.

IAS or the International Accounting Standards were first issued by IASC or the
International Accounting Standards Committee. IASC was set up in 1973 and was in operation
till 2000. In 2001 a structural change was made whereby IASC was restructured into the IASB –

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International Accounting Standards Board. The IASB operates under the control of the
International Accounting Standards Committee Foundation. This Foundation was set up in 2001.

The term International Financial Reporting Standards (IFRSs) has both a narrow and a
broad meaning. Narrowly, IFRSs refers to the new numbered series of pronouncements that the
IASB is issuing, as distinct from the International Accounting Standards (IASs) series issued by
its predecessor. More broadly, IFRSs refers to the entire body of IASB pronouncements,
including standards and interpretations approved by the IASB and IASs and SIC interpretations
approved by the predecessor International Accounting Standards Committee. Currently, there are
29 IAS and 8 IFRS which are in force.

In addition, there is the International Financial Reporting Interpretations Committee

which develops interpretations to interpret the application of International Accounting Standards
(IASs) and International Financial Reporting Standards (IFRSs) and provide timely guidance on
financial reporting issues not specifically addressed in IASs and IFRSs. Interpretations are
developed by IFRIC, exposed for public comment, approved by IFRIC, and then sent to the
IASB Board for review and approval. Prior to the formation of the IFRIC, there was the SIC or
the Standing Interpretations Committee which was super ceded by the IFRIC in 2002. As on
date, there are 11 SICs and 13 IFRICs to provide guidance.

LIST OF CURRENT 'IFRS' ISSUED

The following IFRS statements are currently in force:

IFRS 1 First time Adoption of International Financial Reporting Standards

IFRS 2 Share-based Payment

IFRS 3 Business Combinations

IFRS 4 Insurance Contracts

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 6 Explorations for and Evaluation of Mineral Resources

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IFRS 7 Financial Instruments: Disclosures

IFRS 8 Operating Segments

IAS 1: Presentation of Financial Statements

IAS 2: Inventories

IAS 7: Cash Flow Statements

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10: Events after the Balance Sheet Date

IAS 11: Construction Contracts

IAS 12: Income Taxes

IAS 16: Property, Plant and Equipment

IAS 17: Leases

IAS 18: Revenue

IAS 19: Employee Benefits

IAS 20: Accounting for Government Grants and Disclosure of Government

Assistance

IAS 21: The Effects of Changes in Foreign Exchange Rates

IAS 23: Borrowing Costs

IAS 24: Related Party Disclosures

IAS 26: Accounting and Reporting by Retirement Benefit Plans

IAS 27: Consolidated Financial Statements

IAS 28: Investments in Associates

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IAS 29: Financial Reporting in Hyperinflationary Economies

IAS 31: Interests in Joint Ventures

IAS 32: Financial Instruments: Presentation

IAS 33: Earnings per Share

IAS 34: Interim Financial Reporting

IAS 36: Impairment of Assets

IAS 37: Provisions, Contingent Liabilities and Contingent Assets

IAS 38: Intangible Assets

IAS 39: Financial Instruments: Recognition and Measurement

IAS 40: Investment Property

IAS 41: Agriculture

ACCOUNTING STANDARDS IN INDIA

The ICAI constituted the Accounting Standards Board (ASB) in 1997. The ASB is the
apex body for release of accounting standards in India. The composition of the ASB is broad
based to include industry, representatives of various departments of government and regulatory
authorities, financial institutions and academic and professional bodies. Industry is represented
on the ASB by their associations, viz., ASSOCHAM, CII and FICCI. As regards government
departments and regulatory authorities, Reserve Bank of India, Ministry of Company Affairs,
Comptroller & Auditor General of India, Controller General of Accounts and Central Board of
Excise and Customs are represented on the ASB. Besides these, representatives of academic and
professional institutions such as Universities, IIM, ICWAI and ICSI are also represented on the
ASB.

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The Accounting Standards setting process is an iterative process which includes the following
steps:

 Identification of the broad areas by the ASB for formulating the Accounting Standards.
 Constitution of the study groups by the ASB for preparing the preliminary drafts.
 Consideration of the preliminary draft prepared by the study group by the ASB.
 Circulation of the draft among the Council members of the ICAI and 12 specified outside
bodies such as Standing Conference of Public Enterprises (SCOPE), Indian Banks’
Association, CII, SEBI, CAG, DCA.
 Meeting with representatives of specified outside bodies to ascertain their views on the
draft of the proposed Accounting Standard.
 Finalization of the Exposure Draft of the proposed Accounting Standard on the basis of
comments received and discussion with the representatives of specified outside bodies.
 Issuance of the Exposure Draft inviting public comments.
 Consideration of the comments received and finalization of the draft Accounting
Standard for submission to the Council of the ICAI for its consideration and approval for
issuance.
 Consideration of the draft Accounting Standard by the Council of the Institute, and if
found necessary, modification of the draft in consultation with the ASB.

The Accounting Standard, so finalized, is issued under the authority of the Council.

However, the accounting standards prepared and issued by the ICAI were mandatory
only for its members, who, while discharging their audit function, were required to examine
whether the said standards of accounting were complied with. With the amendment of the
Companies Act, 1956 through the Companies (Amendment) Act, 1999, accounting standards as
well as the manner in which they were to be prescribed, were provided a statutory backing. The
specific statutory force is provided by Section 211 of the Companies Act, 1956 - sub sections
3A, 3B and 3C.

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Convergence with IFRS in India:
In line with the global trend, the Institute of Chartered Accountants of India (ICAI) has
proposed a roadmap for convergence with IFRS for certain defined entities (listed entities, banks
and insurance entities and certain other large-sized entities) with effect from accounting periods
commencing on or after April 1, 2011. Large-sized entities are defined as entities with turnover
in excess of Rs.l00 crores or borrowings in excess of Rs.25 crores.

Accordingly, as part of its convergence strategy, the ICAI has classified IFRS into the
following broad categories:
Category I: IFRS which can be adopted immediately or in the immediate future in view of no or
minor differences (for example, construction contracts, borrowing costs, inventories).
Category II : IFRS which may require some time to reach a level of technical preparedness by
the industry and professionals, keeping in view the existing economic environment and other
factors (for example, share-based payments).
Category III: IFRS which have conceptual differences with the corresponding Indian Accounting
Standards and where further dialogue and discussions with the IASB may be required
(consolidation, associates, joint ventures, provisions and contingent liabilities).
Category IV: IFRS, the adoption of which would require changes in laws/regulations because
compliance with such IFRS is not possible until the regulations/laws are amended (for example,
accounting policies and errors, property and equipment, first-time adoption of IFRS).
Based on the recommendations of the IFRS Task Force, the Council of ICAI, in July
2007, decided to fully converge with IFRS from accounting period commencing from 1st April
2011.
Phase 1: Opening balance sheet as at 1 April 2011
 Companies which are part of NSE Index – Nifty 50
 Companies which are part of BSE Sensex – BSE 30
 Companies whose shares or other securities are listed on a stock exchange outside India
 Companies, whether listed or not, having net worth of more than INR1, 000 crore
Phase 2: Opening balance sheet as at 1 April 2012
Companies not covered in phase 1 and having net worth exceeding (listed or not listed)
INR 500 Crore

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Phase 3: Opening balance sheet as at 1 April 2014. Listed companies not covered in the earlier
phases

Impact of IFRS convergence on fundamental accounting practices:

Harmonizing existing Indian accounting standards with IFRS will have an impact on
some fundamental accounting practices followed in India. A few of these are enumerated below:

Use of fair value concept:

Indian GAAP requires financial statements to be prepared on historical cost except for fixed
assets which could be selectively revalued. Use of fair value is presently limited for testing of
impairment of assets, measurement of retirement benefits and 'mark-to-mark' accounting for
derivatives. Under IFRS, there is a growing emphasis on fair value. In addition to the
requirements under Indian GAAP, the carrying amounts of the following assets and liabilities are
based on fair value under IFRS:
 Initial recognition of all financial assets and financial liabilities is at fair value
 Subsequent measurement of all derivatives, all financial assets and financial liabilities
held for trading or designated at fair value through profit or loss, and all financial assets
classified as available-for-sale, are measured at fair value.
 Non-current provisions are measured at fair value which is derived by discounting
estimated future cash flows.
 Share-based payment awards are measured at fair value.
 Option available for measurement of property plant and equipment at fair value, subject
to certain conditions.
 Option available for measurement of intangible assets at fair value, subject to certain
conditions.
 Option available for measurement of Investment property at fair value.
Substance over form:

Considering the overall theme of substance over form, IFRS mandates preparation of
consolidated financial statements to reflect the true picture of the net worth to various
stakeholders. Exceptions for preparation of consolidated financial statements are very limited. In

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India, currently consolidated financial statements are mandatory only for listed companies and
that also only for the annual financial statements and not the interim financial statements.

Similarly, Indian accounting continues to be driven by the written contract and the form
of the transaction as opposed to the substance. Consider, upfront fees charged by a telecom
service provider. Under Indian GAAP, several companies recognize such upfront fees as income
because it is contractually nonrefundable and is contractually received as fees for the activation
process. Under IFRS, the fee is accounted for in accordance with the substance of the
transaction. Under this approach, the customer pays the upfront activation fee not for any service
received by the customer, but in anticipation of the future services from the telecom company.
Thus, despite the non-refundable nature of the fees, revenue recognition would be deferred over
the estimated period that telecom services will be provided to the customer.

Inconsistencies with existing laws and regulations:

As per the preface to the Indian accounting standards, if a particular accounting standard
is found to be not in conformity with a law, the provisions of the said law will prevail and the
financial statements shall be prepared in conformity with such law. However, under IFRS, the
entity needs to comply with all the accounting standards and other authoritative literature issued
by IASB in order to comply with IFRS. If entities adopt accounting practice as approved by
another regulatory authority or in conformity with a law, which is not in accordance with IFRS,
the financial statement so prepared would not be considered to be in compliance with IFRS.

Disclosures:

In India, Schedule VI to the Companies Act, 1956, which prescribes a detailed format for
preparation and disclosure of financial statements, lays great emphasis on quantitative
information such as quantitative details of sales, amount of transactions with related parties,
production capacities, CIF value of imports and income and expenditure in foreign currency, etc.
Contrary to the same, IFRS is more focused on qualitative information for the stakeholders, such
as terms of related party transactions, risk management policies, currency exposure for the entity
with sensitivity analysis, etc. To more correctly report the liquidity position of the entity, IFRS

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also requires segregation of all assets/liabilities into current and non-current portions. Presently
under Indian GAAP even long-term deposits and advances are disclosed under current assets,
loans and advances, thereby not reflecting the true position.

Exceptional and extraordinary items:

Indian GAAP requires companies to disclose significant events which are not in the
ordinary course of business as extraordinary items and material items as exceptional to facilitate
the reader to consider the impact of these items on the reported performance. Under IFRS there
is no concept of extraordinary or exceptional since all events/transactions are in the normal
course of business and if an item is material, it can be disclosed separately, but cannot be termed
as 'extraordinary' or 'exceptional'.

Restatement of financial statements:

Under Indian GAAP, changes in accounting policies or rectification of errors (prior

period items) are recognized in the current year's profit and loss account (for errors) and are
generally recognized prospectively (for changes in accounting policies). Under IFRS, the prior
period comparatives are restated in both cases. Indian GAAP does not have the concept of
restatement of comparatives except in case of special-purpose financial statements prepared for
public offering of securities.

Determination of functional currency:

Entities in India prepare their general purpose financial statements in Indian rupees.
However under IFRS, an entity measures its assets, liabilities, revenues and expenses in its
functional currency, which is the currency that best reflects the economic substance of the
underlying events and circumstances relevant to the entity i.e., the currency of the primary
economic environment in which the entity operates. Functional currency of an entity may be
different from the local currency.

For example, consider an Indian entity operating in the shipping industry. For such an
entity it is possible that a significant portion of revenues may be derived in foreign currencies,
pricing is determined by global factors, assets are routinely acquired from outside India and
borrowings may be in foreign currencies. All these factors need to be considered to determine

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whether the Indian rupee is indeed the functional currency or whether another foreign currency
better reflects the economic environment that most impacts the entity.

Other significant aspects:

Under Indian GAAP, provision has to be made for proposed dividend, although it may be
declared by the entity and approved by the shareholders after the balance sheet date. Under
IFRS, dividends that are proposed or declared after the balance sheet date are not recognized as
liability at the balance sheet date. Proposed dividend is a non-adjusting event and is recorded as a
liability in the period in which it is declared and approved.

Impact of existing laws and regulations:

Accounting standard-setting in India is subject to direct or indirect oversight by several

regulators, such as the National Advisory Committee on Accounting Standards (NACAS)
established by the Ministry of Corporate Affairs, the Reserve Bank of India (RBI), the Insurance
Regulatory and Development Authority (IRDA) and the Securities and Exchange Board of India
(SEBI). Further, the Indian Companies Act, 1956 (the Act) directly provides guidance on
accounting and financial reporting matters. Courts in India also have the powers to endorse
accounting for certain transactions – even if the proposed accounting treatment may not be
consistent with Generally Accepted Accounting principles.

Companies Act:

The requirements of Schedule VI of the Act, which currently prescribes the format for
presentation of financial statements for Indian companies, is substantially different from the
presentation and disclosure requirements under IFRS. For example, the Act determines the
classification for redeemable preference shares as equity of an entity, whereas these are to be
considered as a liability under IFRS. Also, Schedule XIV of the Act provides minimum rates of
depreciation - such minimum depreciation rates are also inconsistent with the provisions of
IFRS.

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Regulatory guidelines:

The Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority
(IRDA) regulate the financial reporting for banks, financial institutions and insurance companies,
respectively, including the presentation format and accounting treatment for certain types of
transactions. For example, the RBI provides detailed guidance on provision relating to non-
performing advances, classification and valuation of investments, etc. Several of these guidelines
currently are not consistent with the requirements of IFRS.

The Securities and Exchange Board of India has also prescribed guidelines for listed
companies with respect to presentation formats for quarterly and annual results and accounting
for certain transactions, some of which are not in accordance with IFRS e.g., Clause 41 of the
Listing Agreement permits companies to publish and report only standalone quarterly financial
results, however IFRS considers only consolidated financial statements as the primary financial
statements for reporting purpose.

Court procedures:

Courts in India commonly approve accounting under amalgamation/restructuring

schemes, which may not be in accordance with the accounting principles/ standards. Under the
current accounting/ legal framework such legally approved deviations from the accounting
standards/principles are acceptable.

Income tax:

Computation of taxable income is governed by detailed provisions of the Indian Income

Tax Act, 1961.Convergence with IFRS will require significant changes/ clarifications from the
tax authorities on treatment of various accounting transactions.

For example, consider unrealized losses and gains derivatives that are required to be
marked to market under IFRS. Different taxation frameworks are possible for the tax treatment
of such unrealized and gains. The treatment of such unrealized losses/gains will need to be
addressed in line with the convergence time frame. It is imperative that tax authorities are
engaged sufficiently in advance to decide on such critical aspects of taxation.

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 One of the risks of IFRS convergence without adequate involvement of all stakeholders
and adequate regulatory changes is that financial statements prepared using the 'converged'
Indian standards may still not fully comply with IFRS issued by the International Accounting
Standards Board (IASB). This would be very unfortunate as Indian entities that may be required
to present IFRS-compliant financial statements to stakeholders outside India (overseas stock
exchanges, overseas regulators, investors and alliance partners) would still need to reconcile with
such' converged' IFRS financial statements prepared using Indian framework, with IFRS
financial statements that are globally accepted.

Accordingly, at the onset of the convergence, there is a need to develop an enabling

regulatory frame work and infrastructure that would assist and facilitate IFRS convergence. The
Government would need to frame and revise laws in consultation with the NACAS and the ICAI.
Similarly, regulators such as the RBI, IRDA and SEBI would need to consider accepting IFRS in
substitution of the present set of specific accounting rules prescribed by them.

Recent Development:

The Institute of Chartered Accountants of India (ICAI) issued Ind-AS 41, an exposure
draft (ED) on the Indian equivalent of IFRS 1, First-time Adoption of IFRS. Ind-AS will be a
separate body of accounting standards which may not always be the same as IFRS issued by the
International Accounting Standards Board (IASB) (hereinafter referred to as "IFRS").

Thus, if an Indian parent has foreign subsidiaries, which are already using IFRS, the
Indian parent will not be able to use those financial statements in its transition (as well as on an
ongoing basis) to Ind-AS and will have to convert the already IFRS compliant subsidiary to Ind-
AS.

Further, companies which are already IFRS compliant, for example, to comply with
foreign listing requirements, will not be allowed to use these financial statements to claim
compliance with Ind-AS. This will create considerable workload for global Indian companies.

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 Many entities around the world are able to make a dual statement of compliance on their
financial statements, which is an unreserved statement that the financial statements are in
accordance with IFRS and the standards notified in their local jurisdiction. This is only possible
where there are no differences between IFRS and the standards notified locally.

The advantage of making a dual statement of compliance is that the financial statements
can be used within India as well as in almost all major capital markets in the world which accept
IFRS financial statements. If Indian companies fail to make dual statement of compliance, they
may need to reconvert again from Ind-AS to IFRS, at the time of foreign listing.

The positives Any Government would be challenged in making a decision as to whether

to adopt full IFRS or to make certain deviations which are deemed necessary. The advantage of
adopting full IFRS is that it would certainly help entities that are seeking foreign listing. Also,
Indian entities that have several foreign subsidiaries which use IFRS would prefer to have the
entire group on IFRS, rather than for different companies of the group to be on different national
versions of IFRS.

However, such companies as a percentage of total companies in India may be small and
hence the Government may not deem fit to impose full IFRS on all the companies in India for the
sake of this relatively small advantage. Therefore, what kind of changes from IFRS should the
Government consider when notifying Ind-AS? Certainly not the ones that are being
contemplated, for example, the discount rate and the accounting for actuarial gains and losses
with regard to measurement of pension obligation.

With regard to accounting for actuarial gains/losses, multiple options, including deferring
actuarial gains/losses, are available under IFRS which entities in other countries are using. Indian
entities should not be deprived of that benefit, as is evident from the relevant exposure draft
issued by ICAI. It is interesting to note that Australia started off eliminating multiple options
when it first notified the IFRS standards. However, it later fell back to allowing the full range of
options under IFRS.

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 Overall, Ind-AS should not make any departures from the full IFRS standards unless they
are required in the rarest of rare cases. This will ensure that we receive the full benefit of
adopting full IFRS standards.

Unwarranted departure so far it appears that the departures that are expected to be made
(discount rate on long term employee benefits or accounting of actuarial gains/losses) are
unwarranted.

As the standards are not yet notified, and as companies make strong representations, it is
not clear at this stage what further exceptions would be made to the full IFRS standards. The
Government will have to exercise judgment on what departures to make; this could be in the area
of foreign exchange accounting, loan loss provisioning in the case of banks, completed contract
accounting in the case of real estate companies, and so on.

There has to be a solid technical argument for making these exceptions, and a balance
achieved between interests of various stakeholders, such as the company, investors, national
interest, and so on. More importantly, the accounting treatment should fairly represent the
substance of the transaction. That, under no circumstances, should be compromised.

As the timelines for convergence approach, all entities will have to consider their own
roadmap and gear up for complying with the GAAP differences. Convergence to IFRS will be
time-consuming, challenging and will require complete support and sponsorship of the Board of
Directors/Members of Audit Committee/Senior Management. Given the task and challenges, all
entities should ensure that their convergence plans are designed in a manner to achieve the
objective of doing it once, but doing it right.

Benefits of Convergence with IFRS in India:

1. Improved access to international capital markets – a number of the stock exchanges
worldwide require financial statements prepared under globally accepted financial reporting
standards. IFRS encourages international investing and thereby leads to increased foreign capital
flowing into the country.
2. Cheaper Sources of finance – If the industry is able to create confidence among the foreign
investors that their financial statements comply with the globally accepted accounting principles,

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then the industry will be able to raise capital from foreign markets at cheaper rates. Accessibility
to new international markets will also improve the bargaining power of the industry.

3. Saving of Time and Cost – adoption of IFRS will eliminate the need for preparing a dual set
of financial statements and thus will lead to reduction in cost. The need for multiple reporting
and significant adjustments in the preparation and presentation of financial statements in
different countries will also be eliminated and thus will lead to saving of time. Since IFRS is now
accepted as a financial reporting framework for companies seeking to raise funds from most
capital markets across the globe. A recent decision by the US Securities and Exchange
Commission (SEC) permits foreign companies listed in the US to present financial statements in
accordance with IFRS. This means that such companies will not be required to prepare separate
financial statements under Generally Accepted Accounting Principles in the US (US GAAP).
Therefore, Indian companies listed in the US would benefit from having to prepare only a single
set of IFRS compliant financial statements, and the consequent saving in financial and
compliance costs. Accordingly, US listed Indian companies such as Infosys, Satyam Computers
and Sify have already filed financial statements prepared in accordance with IFRS with the SEC.
There are several other companies which are evaluating this option actively.

4. Comparability with global peers – convergence to IFRS will help the domestic companies to
set benchmark standards of target based on global business environment. Domestic companies
will also come to know their relative standing worldwide . Improvement in comparability of financial
information and financial performance with global peers and industry standards. This will result in more
transparent financial reporting of a company’s activities which will benefit investors, customers and other
key stakeholders in India and overseas. The transition to IFRS will also provide impetus to cross-
border acquisitions, enable partnerships and alliances with foreign entities and lower the
integration costs.
5. Opening up of opportunities for professionals – implementation and maintenance of IFRS
would require professional expertise and more over since IFRS focuses on fair value, it will
provide significant opportunities to professionals including Chartered accountants, valuers and
actuaries which will in turn boost the growth prospects of KPO in India.

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Challenges in convergence with IFRS in India:
1. Acceptance- IFRS requires application of fair value principles in certain situations and this
would result in significant differences from financial information currently presented, especially
relating to financial instruments and business combinations. Given the current economic
scenario, this could result in significant volatility in reported earnings and key performance
measures like EPS and P/E ratios. Indian companies will have to build awareness amongst
investors and analysts to explain the reasons for this volatility in order to improve understanding,
and increase transparency and reliability of their financial statements. For example, Diamler
Chrysler’ first report using IFRS increased the automaker’s tax earnings by $ 819 Million to $
5.2 Billion, while EPS (Earnings per Share) increased by 68 cents. Operating Profit, or Earnings
before interest and taxes, dropped by $ 38 Million to $ 7.5 Billion under IFRS. The switch also
reduced the loss suffered by the company’s Chrysler division—the only unit to show a loss—
from $ 1.5 Billion to $ 682 Million. The company attributed most of the above variation to the
way pension obligations are booked under the IFRS.
2. Scarcity of Human resource – implementation and maintenance of IFRS would require expert
professionals in large numbers. Availability of such workforce in a short period of time is a big
challenge in the convergence with IFRS. The preparers, users and auditors continue to encounter
practical implementation challenges. Conversion to IFRS is more than a mere technical exercise.
4. IT Security – as financial accounting and reporting systems are modified and strengthened to
deliver the information in accordance with IFRS, entities need to enhance their Information
System (IT) Security in order to minimize the risk of business interpretations particularly to
address potential frauds, cyber terrorism and data corruption.
5. Tax Planning – IFRS will have significant impact on financial statements and consequently
tax liability. There could be ambiguity on tax treatment of various issues arising out of the
convergence with IFRS. Entities may also need to modify their existing tax planning strategies.
6. Performance Appraisal – since IFRS is based on fair value, the actual reported earnings may
significantly deviate from the expected earnings by the stakeholders and other interested parties.
Various conventional performance indicators may not be of much relevance. In such a situation
it will be difficult to assess the performance of the entity.
7. Compatibility with other Laws and Acts - Compatibility of IFRSs with other Laws and Acts
in the country like Companies Act, 1956 is a big challenge. Further revisions in IFRSs will also

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make the convergence process more complex as with every revision in IFRSs revision may be
required in the existing Law / Act. In India, the accounting standards or accounting-related
requirements are issued not only by the ICAI(Institute of Chartered Accountants of India) but
also by various other regulatory bodies, such as SEBI (Securities and Exchange Board of India),
RBI (Reserve Bank of India) and the IRDA (Insurance Regulatory and Development Authority). 
They now not only need to be consistent with each other but also with the IFRS.
On the companies perspective, before adopting IFRS must detail study and understand
the following guidelines to have better implication and also have better financial results:
-Understanding and analyzing the impact of IFRS on financial performance
-Obtaining the new data required and adapting systems to provide it
-Finding the resources and expertise needed to make the changes
-Meeting employee training and knowledge sharing needs
-Aligning systems for reporting for statutory, regulatory and internal purposes
-Gaining shareholder and analyst understanding of the impact of changing to IFRS.

Conclusion:
Convergence to IFRS will greatly enhance an Indian entities’ ability to raise and attract
foreign capital at a low cost. A common accounting language, such as IFRS, will help Indian
companies benchmark their performance with global counterparts. Early adoption of IFRS gives
companies the opportunity to anticipate challenges, manage outcomes and implement the best
solutions. Companies should consider a dedicated team that will work on the conversion
exercise. For successful implementation of IFRS in India, the regulator should immediately
announce its intention to convert to IFRS and make appropriate regulatory amendments.

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 Bibliography:

Similarities and Differences-A comparison of IFRS, US GAAP and Indian GAAP, November
2006

A book by Price Water House Coopers

IFRS Pocket Guide 2009 a book by Price Water House Coopers

BUSINESS LINE, August 19, 2010

Economic time report-7th July 2008-Richard Rekhy

The Hindu Business line report- D. Murali-http://InterviewsInsights.blogspot.com

www.wikipedia.com

Bombay chartered accountant journal April 2009(p.n.71-75)

www.cci.com

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