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A Study on Convergence of
IFRS in India
Name of Authors : Prof Anand Patil
Kausar K
Venkata Mahendra Prasad
Presented at : SDM Institute of Management Development
Date : 3rd & 4th Aug 2012
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Introduction
The trend capital markets have become global andcontinue to expand, the companies have also becomeMultinational and transnational companies and theyalso continue to expand. This has given a wide stage forthe investors to trade worldwide. The business entities
are in position to access to funds globally. For this theinvestors rely upon the financial statements beforetaking any decisions on their investments.
Every country uses their own accounting standards forthe treatments of their accounts and disclosure patternwith respects to the same. This creates confusionamong the users or investors while interpreting thefinancial statements. This gave the initiation to come
out with IFRS
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Objective of Study
Review the status of Convergence to IFRS in India
To analyze the acceptability of IFRS in India
To know the benefits of IFRS implementation
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IFRS
IFRS-International Financial Reporting Standards,
The world turns into a Global village.
High-quality and globally accepted financial reporting
standards.
They are meant for general purpose financial
statements and for profit oriented entities.
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Status of Convergence to IFRS in
India
Emerging Economy
ICAI released concept paper on convergence inOctober 2007.
Ministry of Corporate Affairs (MCA)
Proposed Implementation schedule from 1 April 2013
by ICAI
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Convergence of IAS with IFRS
Harmonization of IAS with IFRS
Convergence does not mean that IFRS should be
adopted word by word.
ICAI had published the road map of convergence with IFRS.
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Roadmap for Convergence issued by
ICAI
Phase 1 : Opening balance sheet as at 1 April 2011*
Companies which are part of NSE IndexNifty 50
Companies which are part of BSE SensexBSE 30
Companies whose shares or other securities are listed
on a stock exchange outside India
Companies, whether listed or not, having net worth ofmore than INR 1000 Crore (INR 10 billion)
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Phase 2 : Opening balance sheet as at 1 April 2012
Companies not covered in phase 1 and having networth exceeding INR 500 Crore (INR 5 billion)
Phase 3 : Opening balance sheet as at 1 April 2014
Listed companies not covered in the earlier phases
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ICAI Classification of IFRS as a part
of Convergence Strategy
Category I : IFRS which can be adopted
immediately or in immediate future in view of
minor differences.
Category II : IFRS which may require some time
to reach a level of technical preparedness by the
industry and professionals with a view of
existing economic environment.
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Category III : IFRS which have conceptual differenceswith the corresponding Ind AS, where the furtherdiscussion may be required with IASB.
Category IV : IFRS adoption would require changes inlaws because compliance of which such IFRS is notpossible until laws are amended.
The following changes or amendments would berequired,
Companies Act 1956
SEBI guidelines
IRDI rules
RBI & Banking regulation act
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Steps taken for Implementation
Respective changes in Laws through
amendments.
Conducting development programs about IFRSin various cities across country
Supplying educational material on the same
HRD minister proposed to implement study ofaccounting standards from higher education
level
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Difficulties in Implementation
Guidelines on various reporting standards &
formats.
Regulatory guidelines
Securities and Exchange Board of India (SEBI)
Income tax
Companies act
Objections from certain industries.
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Why delay in Implementation
Lack of clarity on the new implementation schedulebeing planned by the MCA.
ICAI, had suggested April 1, 2013, as the next deadline.The MCA remains tight-lipped.
Government finds no urgency.
Some key IFRSs are under revision by the IASB andthese standards will be likely to be applicable from2013.
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Barriers in Implementation
Interest of different countries.
Cost V/S Fair Value Concept.
Affect on GDP calculation.Taxation Policies
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Benefits of Implementation
Improvement in comparability of financial
information, which will result in more
transparent reporting of companies activity.
Better quality of financial reports, consistent
application of accounting principles, which will
lead to increase trust in investors
Better access to & reduction in the Ko raised
from global capital market
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Companies Review
Kazakh Subsidiary of Indias PNB
Increase in Assets by 13 % as on May 2012 Bank obligations decreased by 33 %
Equity raised by 22.2 %
Reduced net loss by 57 %
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Wipro Technologies
1.37% increase in the Total assets value
23% increase in the value of Net tax asset including
deferred taxes
10% increase in other assets 7% increase in total equity
6% decrease in total liability
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Conclusion
It is a difficult task to create two or more differenttypes of financial statements suiting requirements ofdifferent countries
There is need for standard financial statement for
investors of the world looking to invest in the IndianFinancial Market
The Institute of Chartered Accountants of India hadpublished the road map of convergence with IFRS
which will be very soon effective.
Of course there are barriers and disadvantages but thefruits of advantages convergence cannot beunderestimated.
Convergence to IFRS is the need of the hour to walk
with the all in the world of financial reporting
