Accounting Standards in India:
Adoption of IFRS
Accounting Standards are
the principles that governs and conceptualise the accounting practices. They
works as a benchmark in the accounting field. Accounting standards are also
called generally accepted accounting principle (GAAP). It is used to measure the
impact of accounting transactions and event.it provides the standardised
treatment of each and every transaction. For example, depreciation, valuation
of stock.in India the institute of chartered accountant of India (ICAI) frames
accounting standards. Every country has its own sets of accounting standards
called generally accepted accounting principle (GAAP). Globalisation plays a
very important role in the growth of the country. As far as growth of the
country is concerned, it is totally dependent on the organisational structure
of that country. The financial strength and capability of the organisation can
be assessed with the help of financial statements of that company.
International Financial Reporting Standards are the international accounting
standards in which the financial reporting is done. IFRS is more transparent,
reliable and provide the uniformity among different countries in terms of
financial reporting. The responsibility for developing IFRS is on international
accounting standard board (IASB), .which is an independent not for profit
organisation previously known as international accounting standard committee
(IASC). Now the cross-border
transactions can be easily done just because of uniformly in the accounting
standards. It will help to attract the foreign investor to invest in that
country who has adopted IFRS or in the process of adopting IFRS
Out of 180 countries more than 150
countries including India have adopted international financial reporting
standards so far (IFRS).on 16-February 2015 Ministry of corporate affairs(MCA)
has issued the notification to implement ind AS in India for the listed
,unlisted ,banking, NBFC ,insurance companies .There are two approaches for
adoption of IFRS.
India is in
implementation phase of IFRS. .India is not adopting IFRS, it is converging
IFRS. In India the institute of chartered accountant of India (ICAI) set up by
an act of parliament 1949 has took the responsibility to converge IFRS. The
converged form of IFRS in India is known as Ind AS.
This paper will highlight
the introduction, approaches, roadmap of implementation of IFRS, benefits and
challenges of adoption of IFRS in India. This paper will also provide some
space for further researcher to do research on IFRS.
Key words: Globalisation,
international accounting standards, financial statements
Accounting is the
art of recording transactions in the best possible manner, so as to enable the
reader to arrive at judgments and take decisions. In this regard, it is utmost necessary
that there are a set of guidelines. These guidelines are generally called Accounting
Policies. The intricacies of Accounting Policies permitted Companies to alter their
accounting principles for their benefit. This made it impossible to make
comparisons. For the sake of comparison and to avoid discrepancies among accounting
principle, Standards needed to be set by the recognized Accounting Bodies. This
paved the way for Accounting Standards to come into Existence. The Accounting
Standards are set by the Regulatory Bodies like the International Accounting
Standard Board (IASB) and the Financial Accounting Standards Board (FASB).
Accounting Standards are formulated with a view to harmonize different accounting
policies and practices in use in a country. The objective of Accounting
Standards is to curb down the accounting
choices in the preparation of the Financial Statements within the bounds of rationality,
thereby ensuring comparability of the Financial Statements of different enterprises
with a view to provide meaningful information to the various users of the
Financial Statements to enable them to make informed economic Decisions. Adoption
of IFRS means the use of the International Financial Reporting Standards as the
primary GAAP by the domestic listed and unlisted companies in their
consolidated Financial Statements for the external Financial Reporting. This
means that the basis of the presentation note and auditor’s report indicate
that the Financial Statements are prepared on the basis of IFRS. In 2010 the
regulatory body of India, Institute of Chartered Accountants of India (ICAI)
has issued 32 Accounting Standards numbered AS-1 to AS-7 and AS-9 to AS-32
(AS-8 merged with AS-26). In G20, the idea of convergence of Indian GAAP with
IFRS was made by the Prime Minister of India Dr. Manmohan Singh to align the
Indian Accounting Standards with the IFRS for accounting periods commencing on
or after 1st April 2011 in a phased manner as envisaged in the
Roadmap to IFRS formulated by the Ministry of Corporate Affairs. The new set of
standards which has been converged with IFRS is known as India Accounting
Standards or Ind AS. The Ministry of Corporate Affairs has notified 35 Ind AS
on 25 February 2011.
By adopting IFRS,
there will be growth in the international business which leads to the economic
development of a country. It encourages International Investment which will
lead to more foreign capital inflow into the country. Investors would be
provided with the information that is more relevant, reliable, timely, and
comparable across the jurisdictions. IFRS would enhance the comparability
between the markets at lower cost if it can create confidence in the minds of
the foreign investors that its Financial Statements comply with the globally
accepted Accounting Standards. It would reduce different accounting
requirements prevailing in various countries thereby enabling the enterprises
to reduce the cost of compliances. It serves international clients by providing
professional opportunities. It would increase their mobility to work in
different parts of the world either in industry or practice. In this context,
it becomes necessary to make an analysis of the adoption of IFRS in India. Financial
Statements of various companies across the globe. The industry would be able to
raise capital from the foreign
1. Ms. Archana
Patro and Dr. V.K. Gupta (2012) in their article “Adoption of International
Financial Reporting Standards (IFRS) in Accounting Curriculum in India- An
Empirical Study” investigated the perceptions of IFRS among the Indian
management students and assessed the level of planning for adoption of the
standards and stated that it would assist the management schools and
universities with decision regarding adoption of IFRS in Indian Accounting curriculum.
2. Sarbapriya Ray
(2012) in her article “Indian GAAP and its convergence to IFRS: Empirical
Evidence from India” studied the rationale behind introducing IFRS, made a
comparative analysis of the Indian Accounting Standards and IFRS, studied the
challenges involved in IFRS while adopting it in India, and analysed the impact
and consequences on financial statements due to IFRS adoption in Wipro Ltd.
3. Titas Rudra and
Dipanjan Bhattacharjee (2012) in their research paper “Does IFRS influence
Earning Management? Evidence from India” focused on Earning Management in India
and the influence of IFRS.
4. Dr. Bhuvender
Choudhary, Rachit Gupta and Hemant Chauhan (2012) in their research article
“Convergence of IFRS in India- Strategy, Benefits and Challenges for Infrastructure
Industry” revealed that the adoption of IFRS will reflect more appropriately
the revenues of Indian Real Estate developers and their ability to deliver projects.
They also believe that IFRS deals with the market risks that are related to
real estate projects more effectively than the percentage completion method.
5. Dr. U.V.
Panchal (2012) in his article “IFRS – opportunities and challenges before
India” focused on challenges in the convergence with IFRS faced by India.
6. Sankar Thappa
(2012) in his article “IFRSs in Indian Banking Industry: Challenges Ahead”
examine the impact of IFRS in Indian Banking Industries, the various phases of
implementation of IFRS in the banking sector in India and he also highlights on
the challenges ahead in the implementation of IFRS on Indian Banking Sector and
the possible ways to address the challenges.
7. Shobana Swamynathan
and Dr. Sindhu (2012) in their research paper “Financial Statements effects on convergent
to IFRS – A case study in India” examined the financial statement effects on
convergence to IFRS from the Indian GAAP and they concluded that the IFRS is a
fair valuation approach and have more transparent disclosures and Indian GAAP
is a conservative approach.
8. Sarbapriya Ray
(2011) in her research article “Emergence of International Financial Reporting Standard
in India’s Accounting Scenario” examined the rationale behind adopting IFRS in
Indian Accounting Scenario, the dissimilarities among the Indian GAAP and IFRS and the convergence procedure to be
adopted to correlate Indian Accounting Standards with IFRS and major divergence
that existed between IFRS and Indian GAAP.
9. Pawan Jain
(2011) in his research article “IFRS implementation in India: Opportunities and
challenges” discuss the problems faced by the stakeholders in the process of
adoption of IFRS in India.
10. C.A. Mohammad
Firoz, Prof. A Aziz Ansari and Kahkashan Akhtar (2011) in their article “IFRS-
impact on Banking Industry” analyze the impact of IFRS on Indian Banking Industry
after implementation of IFRS standards and they shows the areas in which Indian
Banking Industry is required to focus before and after the implementation of
IFRS and their consequences on financial statements of the Banks.
Suvaran and Sarkar Aniruddha (2011) in their paper “IFRS and its adoption in
India: A Study” an Endeavour has been made by the authors to ascertain the
extent of implementation of IFRS in India.
12. Curtis E.
Clements, John D. Neil and Scottstovall O (2010) in their article ” Cultural
Diversity, Country size and IFRS adoption decision” empirically examined the
IFRS standards adoption decision of 61 countries in an attempt to determine why
some countries have adopted IFRS while other, at least to this point in time, have
chosen not to adopt.
13. Thomas Jeanjean
and Herve Stolowy (2008) in their article “Do accounting standards matter? An exploratory
analysis of earnings management before and after IFRS adoption” analyzes the
effect of the mandatory introduction of IFRS Standards on earning quality and
more precisely on earning management. They recommended that the IASB, the SEC
and the European Commission should now utilise their efforts to harmonizing
incentives and institutional factors rather than harmonizing accounting
14. Tanaji G.
Rathod (2006) in his article “IFRS: Emerging opportunities and challenges for
India” investigates the rationale behind the IFRS and its impact on the
financial and accounting world. The review of literature reveals that various
studies have been made on convergence of IFRS. However, a detailed analysis on
adoption of IFRS in India has not been done. Hence, the study is undertaken to
fill this research
The study is based
on secondary data which include journals, websites, books, and periodicals. The
scope of the study includes phase-wise and sector-wise
IFRS in India. For sector-wise analysis, all the phase I companies are taken.
of the Study
The objectives of
the study are to
Phase-wise implementation of IFRS in India.
• Testing the
Sector-wise implementation of IFRS in India.
reporting in India:
Phase I Voluntary Compliance for accounting periods
beginning on or after 1st April, 2015
Companies can voluntarily
comply with Ind-AS. However, this choice is irrevocable. No threshold limits of
net worth or turnover for compliance of Ind-AS voluntarily.
Any type of company,
whether listed or not, public or private, if voluntarily wants to comply with
Ind-AS can do so.
Para 4 of the Rules 2015
prescribes as to which type of Companies shall comply with Ind-AS.
Any company may comply with
the Indian Accounting Standards (Ind AS) for financial statements for
accounting periods beginning on or after 1st April, 2015, with the comparatives
for the periods ending on 31st March, 2015, or thereafter ( Para 4.1 of the
No threshold limit specified –
subsidiaries, associates and JVs are required not to follow Ind-AS for
this category of company , however on practical note the group companies
will follow Ind-AS
Once applied the Company has to
follow consistently and for ever, regardless of fall in net worth etc.
Phase II Mandatary Adoption for accounting periods beginning on or after 1st
• All companies with the Net worth of Rs. 500
crores or more either as on 31.03.2016 have mandatorily adopted Ind AS for the
financial year commenced from April 1, 2016 under Phase I.
Phase III II Mandatary Adoption for
accounting periods beginning on or after 1st April, 2017
• From April 1, 2017.
• All companies listed or in the process of
• Interim reporting is applicable to listed
Companies from quarter ending 30.06.2017.
• Unlisted Companies having Net worth of Rs.
250 crores but less than Rs. 500 crores either as on 31.03.2014, 2015, 2016 or
Phase IV II Mandatary Adoption for accounting
periods beginning on or after 1st April, 2018
• All NBFCs having Net worth of Rs. 500
crores or more from Apr 1, 2018.
• All listed NBFCs.
• Unlisted NBFCs having Net worth of Rs 250
crores but less than Rs 500 crores from Apr 1, 2019
IFRS is a
globalization theme and many countries in the world like Hong Kong, Australia,
Pakistan, Russia, South Africa, Singapore, Turkey, and European Union were following.
Approximately, 150 Countries across the world are following IFRS. Adoption of
IFRS means the use of the International Financial Reporting Standards as the
primary GAAP by the domestic listed and unlisted companies in their consolidated
Financial Statements for the external Financial Reporting. This means that the
basis of the presentation note and auditor’s report indicate that the Financial
Statements are prepared on the basis of IFRSs. It will provide a chance for India
to integrate with the common Accounting International Standards which will save
the cost which has to be incurred by MNC’s and internationally listed corporate
for maintaining dual accounting and reporting system. IFRS would enhance the
comparability between the Financial Statements of various companies across the
globe. The industry would be able to raise capital from the foreign markets at lower
cost if it can create confidence in the minds of the foreign investors that its
Financial Statements comply with the globally accepted Accounting Standards. It
would reduce different accounting requirements prevailing in various countries thereby
enabling the enterprises to reduce the cost of compliances. It serves
international clients by providing professional opportunities. It would
increase their mobility to work in different parts of the world either in
industry or practice. The Government has created general awareness about IFRS
and the ground is prepared to bring necessary changes in the accounting
practices. The Ministry of Corporate Affairs is constrained delaying the
adoption of IFRS. It is made optional to the companies to either report their
Financial Statements based on the existing Indian AS or adopt IFRS. A decision
may be taken to make the application of IFRS mandatory from the year 2016.
Though the time line for convergence of Indian GAAP with IFRS is April 2011,
many large listed companies have already adopted new standards and those who
are in transition will be actively incorporating the change in the coming
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