Countries around the world have accepted the importance of converging accounting standards and are well on their way towards implementing them. Most countries have adopted IFRS standards and are in various stages of adoption at the end of this financial year.
The Implications of IFRS Convergence for Indian Companies
Investments in India are valued at lower of the cost of fair trade value under Indian accounting standard – one of the divergences from IFRS. After implementing IFRS, only fair value will be calculated. The differences of our Indian accounting Standard with IFRS are minor with respect to IAS – 2 inventories, IAS – 7 cash flow statements, IAS – 20 accounting for government grants and disclosure of government assistance, AS – 33 earnings per share, AS 36 impairment of assets, AS – 38 intangible assets etc, therefore the transition to IFRS for Indian companies is certainly easier.
Benefits of IFRS for Indian Companies
Ease of Investments
Overseas investors will choose economies with IFRS compliant financial statements.
Higher Confidence Levels
Organizations will operate with the confidence of having a common accounting system perceived as stable and transparent.
IFRS will eliminate barriers to cross border listings and will be beneficial for investors who ascribe a risk premium if the underlying financial information is not prepared in accordance with international standards.
Mergers & Acquisitions Made Easier
Trans border acquisitions and mergers will be easier for both parties in as far as redrawing of documents is concerned.
Companies have adopted IFRS from FY10 to make available comparative figures in the annual report. Successful transition requires a planned procedure well in advance. Several large listed companies have moved to the new standards and those in transition are actively incorporating the changes, in the beginning of the new financial year.