IFRS AND ITS IMPACT ON INDIAN CORPORATES

In partial fulfillment of the Course: Dissertation In Term VIII of the Post Graduate Program in Management (Batch: Aug. 2009 2011)

Prepared by SHANKAR RAO Registration No: 09PG407

Bangalore

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IFRS AND ITS IMPACT ON INDIAN CORPORATES

In partial fulfillment of the Course: Dissertation In Term VIII of the Post Graduate Program in Management (Batch: Aug. 2009 2011)

Prepared by SHANKAR RAO Registration No: 09PG407

Bangalore

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Bangalore

Post Graduate Program in Management Aug. 2009 - 2011 Term VIII: Dissertation

Declaration
This is to declare that the report entitled IFRS
AND ITS IMPACT

ON INDIAN CORPORATES is

prepared for the partial fulfillment of the course: Dissertation in Term VIII (Batch: Aug. 2009-2011) of the Post Graduate Program in Management by me under the guidance of Prof. Zohra Bi. I confirm that this dissertation truly represents my work. This work is not a replication of work done previously by any other person. I also confirm that the contents of the report and the views contained therein have been discussed and deliberated with the Faculty Guide.

Signature of the Student

Name of the Student (in Capital Letters)

: SHANKAR RAO

Registration No

: 09PG407

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Post Graduate Program in Management

Certificate
This is to certify that Ms. Shankar Rao Regn. No. 09PG407 has completed the dissertation entitled IFRS AND ITS IMPACT ON INDIAN CORPORATES under my guidance for the partial fulfillment of the Course: Dissertation in Term VIII of the Post Graduate Program in Management (Batch: Aug. 2009 2011).

Signature of Faculty Guide:

Name of the Faculty Guide: ZOHRA BI

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ACKNOWLE
I woul li to t

E ENT

t i opportunit to express my sincere gratitude to all t ose who have

extended their help during my dissertation and have made this study possi le. Their constant guidance, support and encouragement resulted in the realization of this research. I would li e to thank my faculty guide for her excellent support and guidance during the tenure of the dissertation programme. I am thankful to my family and friends for their consistent guidance, support and encouragement throughout my work. I would also take the opportunity to thank my institute Alli element of any long lasting endeavour. Lastly I would like to thank the almighty God for providing me strength, skills and intelligence which helped me to complete my journey of PGPM with ease and grace. B i U iv i ,

Bangalore, for having created a stimulating atmosphere of academic excellence, the basic

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TABLE OF CONTENT

TENTS

PAGE NO.

EXECUTIVE SUMMARY INTRODUCTION OBJECTIVES OF THE STUDY LITERATURE REVIEW ANALYSIS FINDINGS CONCLUSION RECOMMENDATIONS REFERENCES

08 10 19 22 27 98 100 102 104

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LIST OF TABLE AND CHARTS

CONTENT FINANCIAL STATE ENT IFRS CONVERSION PROGRAMME IFRS FINANCIAL STATEMENT APPLICABILITY OF IFRS BENEFICIARIES OF CONVERGENCE WIT IFRS

PAGE NO

18 33

33 34 59

DIFFERENT STANDARD OF IFRS AND IAS COMPARATIVE STATEMENT OF IFRS & IAS

77

95

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EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY
IFRS (International Financial Reporting Standards) is a set of accounting standards developed by the International Accounting Standards Board (IASB) an independent, not forprofit organization. Todays financial landscape with its dynamic markers evolving market conditions, and fierce competition among corporations- is filled with challenges for the riskaverse investor. Perhaps the greatest challenge is to access an organisations current and expected economic performance. An essential part of this task is to scrutinize financial statement for compliance with regulatory accounting standards which has given rise to a strong need for IFRS. Thus, IFRS have become the backbone of financial reporting, capturing best practices throughout the world. These standards are used by most capital providers that expect financial information to be presented in a comprehensive, transparent and easily understood reporting framework which was previously known as the International Accounting Standard (IAS).IFRS rapidly are becoming a lens through which providers of debt and equity capital examine their investment choices. IFRS are used in many parts of the world. Countries like European Union, Hong Kong, Australia, Malaysia, and Pakistan, GCC countries, Russia, South Africa, Singapore, Turkey and many more countries have already started following IFRS reporting. In addition, the US is also gearing towards IFRS as the SEC in the US is slowly but progressively shifting from requiring only US GAAP to accepting IFRS in the long-term. In India the Institute of Chartered Accountants of India (ICAI) had announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2013. Even Reserve Bank of India has stated that financial statements of banks need to be IFRS compliant for periods beginning on or after 1 April 2013. Adoption of IFRS is mandatory for the following entities: a) Public and private companies, listed as well as those which are in the process of getting listed, b) Private companies who have issued debt instruments in a public market; and c) Private companies which hold assets in a fiduciary capacity (e.g., banks, insurance companies). The report work focuses on the effects of implementation of IFRS in Indian companies for which the main issues is to know about the convergence of IAS with IFRS and all the issues related to this convergence with Indian perspectives. Starting with an introduction to IFRS will then explain its benefits on all levels. Further the major differences between IFRS and Indian Accounting Standards is also highlighted in the report.
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INTRODUCTION

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INTRODUCTION
Basically IFRS is developed to provide a single set of high quality global standards and a global framework for how public companies prepare and disclose their financial statements. It provides general guidance for the preparation of financial statements. Currently, over 100 countries permit or require IFRS for public companies, with more countries expected to transition to IFRS by 2015. Having an international standard is especially important for large companies that have subsidiaries in different countries. Adopting a single set of world-wide standards will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a cohesive view of finances. IFRS has replaced the older standards IAS (International Accounting Standards). In todays complex economic environment, the measurement and presentation of financial information is critical as far as allocation of economic resources is concerned. Accounting was created as a mean of measuring and reporting upon such economic activity. Throughout the world, various accounting bodies are engaged in the task of formulating and implementing accounting policies and practices to show true and fair view of the financial statements, which are the basis of decision making for the stakeholders of the company. Accounting as a business language communicates the financial results of an enterprise to various interested parties by means of financial statements exhibiting true and fair view of its state of affairs as also of the working results. Various accounting bodies have been developed to set rules for accounting. The rules set by them are also called Accounting Standards. Accounting Standards (ASs) are written policy documents issued by expert accounting body or by Government or other regulatory body covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions in the financial statements. The main purpose of the standard setting bodies is to promote the dissemination of timely and useful financial information to investors and certain other parties having an interest in the companys economic performance. The Accounting Standards are basically set to deal with the issues of (I) recognition of events and transactions in the financial statements, (II) measurement of these transactions and events, (III) presentation of these transactions and events in the financial statements in a manner that is meaningful and understandable to the reader, and (IV) the disclosure
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requirements which should be there to enable the public at large and the stakeholders and the potential investors in particular, to get an insight into what these financial statements are trying to reflect and thereby facilitating them to take prudent and informed business decisions. The emergence of transnational corporations in search of money, not only for fuelling growth, but to sustain ongoing activities has necessitated raising of capital from all parts of the world. Each country has its own set of rules and regulations for accounting and financial reporting. Therefore, when an enterprise decides to raise capital from the markets other than the country in which it is located, the rules and regulations of that other country will apply and this in turn will require that the enterprise is in a position to understand the differences between the rules governing financial reporting in the foreign country as compared to its own country of origin. Therefore translation and re-instatements are of utmost importance in a world that is rapidly globalizing in all ways. The accounting standards and principle need to be robust so that the larger society develops degree of confidence in the financial statements, which are put forward by organizations. A financial reporting system supported by strong governance, high quality standards, and firm regulatory framework is the key to economic development. Sound financial reporting standards underline the trust that investors place in financial reporting information and thus play an important role in contributing to the economic development of a country. In India, The Institute of Chartered Accountants of India (ICAI) as the accounting standards formulating body has always made efforts to formulate high quality Accounting Standards and has been successful in doing so. As the world continues to globalize, discussion on convergence of national accounting standards with International Financial Reporting Standards (IFRSs) has increased significantly. In this scenario of globalisation, India cannot insulate itself from the developments taking place worldwide. In India, so far as the ICAI and the Governmental authorities such as the National Advisory Committee on Accounting Standards established under the Companies Act, 1956, and various regulators such as Securities and Exchange Board of India and RBI are concerned, the aim has always been to comply with the IFRSs to the extent possible with the objective to formulate sound financial reporting standards. It has also become imperative for India to make a formal strategy for convergence with IFRSs with the objective to harmonize with globally accepted accounting standards.
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India has committed itself at the G-20 to make its companies, IFRS compliant from April 1st, 2011. Though India has not adopted the IFRS in full but it converged its Accounting Standards (AS) to get those in line with the international reporting standards. In this process Indian government, till date has issued 35 accounting standards which are in line with existing IAS and IFRS. Impact of IFRS on Indian businesses can be studied in various contexts. We will do a cost benefit analysis of the same. Cost Associ ted With Implementation of IFRS. 1) The transition to IFRS will place a burden on company staff. Training of staff will be deemed necessary. Further, companies have to employ staff on a permanent basis to take responsibility for compliance with accounting standards and disclosure requirements. This will increase the manpower cost for companies. 2) Information and communication technology (ICT) systems may not be able to supply information in all instances to be required to achieve compliance with IFRS, which suggests that more ICT system changes will be seen in the future. For example maintenance of information relating to property, plant and equipment, such as updating of the fixed asset register and recording and updating of the residual values and useful lives, in the transition to to IAS 16 (property, plant and equipment) will be a burdensome task. 3) In a few cases, the adoption of IFRSs may cause hardship to the industry. To avoid the hardship, some companies may go to the court to challenge the standard. Earlier, to avoid hardship in some genuine cases, the ICAI has deviated from corresponding IFRS for a limited period till the preparedness is achieved. But now such deviation will not be there as the new accounting standards are in line with IFRS. Benefits Associated with implementation of IFRS. 1) As the forces of globalization prompt more and more countries to open their doors to foreign investment and as businesses expand across borders, both the public and private sectors are increasingly recognizing the benefits of having a commonly understood financial reporting framework, supported by strong globally accepted standards. The benefits of a global financial reporting framework are numerous and include:
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 Greater comparability of financial information for investors; Greater willingness on the part of investors to invest across borders; Lower cost of capital; More efficient allocation of resources; and Higher economic growth. Challenges for Small and Medium-Sized Entities In emerging economies like India, a significant part of the economic activities is carried on by small- and medium-sized entities (SMEs). Such entities face problems in implementing the accounting standards because of: Scarcity of resources and expertise with the SMEs; and the Cost of compliance is not commensurate with the expected benefits Hence keeping in mind Government of India has decided that non-listed companies which have a net worth of Rs. 5000 Millions or less and whose shares or other securities are not listed on Stock Exchanges outside India and Small and Medium Companies (SMCs) will not be required to follow the notified Accounting Standards which are converged with the IFRS (though they may voluntarily opt to do so) but need to follow only the notified Accounting Standards which are not converged with the IFRS. In this changing scenario, India cannot cut off itself from the developments taking place worldwide. At present, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) formulates Accounting Standards (ASs). Complex nature of IFRSs and the differences between the existing ASs and IFRSs, the ICAI is of the view that IFRSs should be adopted for the public interest entities such as listed entities, banks and insurance entities and largesized entities from the accounting periods beginning effect from April, 2011. Convergence to IFRS would mean India would join a league of more than 100 countries, which have converged with IFRS. Converging to IFRS by Indian companies will be very challenging and on the contrary it could also be rewarding too.

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Benefits to corporates in the Indian context World Class Peer Standards for Financial Reporting: IFRSs will surely enhance the comparability of financial information and financial performance with global peers and industry. This will result in more transparent financial reporting of a companys activities which will benefit investors, customers and other key stakeholders in India and overseas. The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements. Investors: It will be a great help for those investors who wish to invest outside their own country and looking for a Financial statements, which prepared by using a common set of accounting standards IFRS provides them better comprehensible investment opportunities as opposed to financial statements prepared using a different set of national accounting standards. For better understanding of financial statements, global investors have to incur more cost in terms of the time and efforts to convert the financial statements so that they can confidently compare opportunities. Investors confidence would be well-built if accounting standards used are globally accepted. Convergence with IFRSs contributes to investors understanding and confidence in high quality financial statements. The industry: It will be easier to raise capital from foreign markets at lower cost if the industry can create confidence in the minds of foreign investors that their financial statements comply with globally accepted accounting standards. The burden of financial reporting is lessened with convergence of accounting standards because it simplifies the process of preparing the individual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of accounting standards. The accounting professionals: Convergence with IFRSs also create more business opportunity to the accounting professionals in a great way that they are able to sell their services as experts in different parts of the world, it offers them more opportunities in any part of the world if same accounting practices prevail throughout the world. They are able to quote IFRSs to clients to give them backing for recommending certain ways of reporting. Challenges to Indian Corporate Laws and regulations: There is a need to bring a change in several laws and regulations governing financial accounting and reporting system in India. In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which financial information is reported or presented in financial statements.
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Lack of adequate professionals: There is a lack of adequate professionals with practical IFRS conversion experience and therefore many companies will have to rely on external advisers and their auditors. Replacement and Up gradation in systems: Conversion to IFRS will require extensive upgrades or total replacement of major system. With sufficient planning, upgrades and replacements can occur as part of the overall strategic technology planning and procurement process. Convert historical data: Historical data from recent prior periods will have to be recast for comparative purposes. This is necessary to permit accurate and comparative trend and ratio analysis. Record retention requirements should be reviewed to ensure that data currently being retained is detailed enough to permit proper restatement of prior-period financials. Coordination of Conversion System: For many organizations, the conversion to IFRS will be a multi-year exercise with numerous changes to technology infrastructure and systems. Development of new technology systems should be carefully examined so IFRS requirements can be incorporated. Hence there will be two sets of accounting standard in India. Adopting IFRS by Indian corporates is going to be very challenging but at the same time could also be rewarding. Indian corporates are likely to reap significant benefits from adopting IFRS. The European Unions experience highlights many perceived benefits as a result of adopting IFRS. Overall, most investors, financial statement preparers and auditors were in agreement that IFRS improved the quality of financial statements and that IFRS implementation was a positive development for EU financial reporting (2007 ICAEW Report on EU Implementation of IFRS and the Fair Value Directive).

There are likely to be several benefits to corporates in the Indian context as well. These are:

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 companys activities which will benefit investors, customers and other key stakeholders in India and overseas; the adoption of IFRS is expected to result in better quality of financial
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reporting due to consistent application of accounting principles and improvement in reliability of financial statements. This, in turn, will lead to increased trust and reliance placed by investors, analysts and other stakeholders in a companys financial statements; and Better access to and reduction in the cost of capital raised from global capital markets since IFRS are 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. However, the perceived benefits from IFRS adoption are based on the experience of IFRS compliant countries in a period of mild economic conditions. The current decline in market confidence in India and overseas coupled with tougher economic conditions may present significant challenges to Indian companies. 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. This situation is worsened by the lack of availability of professionals with adequate valuation skills, to assist Indian corporates in arriving at reliable fair value estimates. This is a significant resource constraint that could impact comparability of financial statements and render some of the benefits of IFRS adoption ineffective

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TABLE 1

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OBJECTIVE OF STUDY

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NEED AND SCOPE OF T E STUDY

As a student of Finance and Accounts it is very necessary to know and study about the journey of our country towards the adoption of International Financial Reporting Standards and how is it different from the present Indian General Accepted Accounting Principles. There is so much to discuss about the upcoming topic IFRS which is suppose to support the growing international synergy. Thus it has generated curiosity in me to know something about the way the cross border investment demands. The scope of IFRS lies in the fact that it is eventually inevitable for any country to fully converge to IFRS because of its wider applicability and various other reasons. Scope of study on this topic as such is thus very wide because full conversion of the accounting standards would need thorough study and interpretation of these standards. The IASB itself is still in the process of developing new standards and amendments in the existing standards so that it would be easier and quicker for all the countries to adopt IFRS and need further illustration.

OBJECTIVES OF T E STUDY
The present conceptual paper has been prepared keeping in view the following objectives:

To study the convergence of Indian GAAP with IFRS To know about the benefits of convergence of Indian GAAP with IFRS To study the challenges, risks and overall impact specific to Indian Industry in adoption of IFRS.

2. 3.

4. 5.

To know the different standards in both IAS and IFRS. To give suggestions towards successful implementation of IFRS.

RESEARCH METHODOLOGY
The main goal behind the preparation of this report is to do a rigorous study of the perceived impact of the International Financial Reporting Standards on the Indian Companies and the economy as well.

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SOURCE OF DATA COLLECTION The data collected for the study is from the secondary sources. This includes internet, research papers, reports, magazines & newspapers, text books and various journals and publications pertaining to the subject matter.

LIMITATIONS OF THE STUDY

The main limitations of this research process are:

The findings of these studies mainly represent the influences of the IFRS implementation on external level and not a detailed study on its real impact on the internal level.

Nor has the research revealed an empirical study covering the influence of adopting an external financial reporting system on the business management within organizations.

A particularly interesting research gap is the linkage between financial accounting and managerial accounting relating to the IFRS which is again not covered in the study.

As IFRS has not been practically introduced in full fledge, the implications were difficult to understand.

The research is based on secondary resources only so any wrong information in the data collected would lead to wrong understanding about the concept.

Lack of time to do the research was another important limitation.

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LITERATURE REVIEW

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LITERATURE REVIEW
1. Topic-Convergence with IFRS in an expanding Europe: progress and obstacles identified by large accounting firms survey Author: Robert K. Larson and Donna L. Street. Department of Accounting, School of Business Administration, University of Dayton, 300 College Park, Dayton, OH Published Year: 2004 The International Accounting Standards Board (IASB) acquired greater legitimacy and stature when the European Union (EU) decided to require all listed companies to prepare consolidated accounts based on International Financial Reporting Standard (IFRS) s beginning in 2005. This study examined the progress and perceived impediments to convergence in 17 European countries directly affected by the EU's decision. These include: (1) the 10 new EU member countries, (2) EU candidate countries, (3) European Economic Area (EEA) countries, and (4) Switzerland. We utilize data collected by the six largest international accounting firms during their 2002 convergence survey. Additionally, they analyzed subsequent events and studies. While all surveyed countries will either require or effectively allow listed companies to prepare consolidated financial statements in accordance with IFRS by 2005, few were expected to require IFRS for non-listed companies. This suggests the development of a twostandard system. The two most significant impediments to convergence identified by the survey appear to be the complicated nature of particular IFRS (including financial instruments) and the tax-orientation of many national accounting systems. Other barriers to convergence include underdeveloped national capital markets, insufficient guidance on firsttime application of IFRS, and limited experience with certain types of transactions (e.g. pensions).

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2. Topic-Factors Influencing the Extent of Corporate Compliance with IFRS - The Case of Hungarian Listed Companies Authors: Szilveszter Fekete, Dumitru Matis & Janos Lukacs Published Year: 2008 Since 2005 European listed companies report their financial figures based on IFRSs. This paper investigates whether Hungarian listed companies comply with IFRS disclosure requirements, identifying some factors associated with the level of compliance. Although the issue of consolidation is not a new topic for Hungarian specialists, the analysis focuses on the disclosure aspects of consolidation because publishing consolidated accounts is considered still a problematic field. Findings of this research report suggests that corporate size and industry type (more specifically being in the IT&C sector) are statistically associated with the extent of compliance with IFRS disclosure requirements. This suggest that big, high tech companies comply best to IRFS rules, possibly because they can benefit the most from them. 3. Topic-First time adoption of IFRS, Fair value option, Conservatism: Evidences from French listed companies Author: Samira Demaria and Dominique Dufour The European Commission set 2005 as the date for the move to IFRS for all companies listed on European stock exchanges. The paper studied the first adoption of IFRS within the perspective of the accounting options concerning the fair value method. The optional standards included in the study were: fair value exemption of IFRS 1, IAS 16, 38 and 40. The sample was composed of the firms of the SBF 120 index. IFRS choices were linked to the characteristics of the firm such as: size, leverage, CEOs compensation, and ownership structure, cross-listing and financial sector. The statistical analysis used a logistic regression method to attempt to identify systematic differences between firms adopting fair value and others. This study considered the choice of conservatism as an identified criterion for explaining fair value choices. Results suggest that for this French sample of firms fair value adoption is not linked with size, financial leverage, CEOs compensation, institutional ownership and cross-listing. Findings show that the majority of French companies maintained historical cost for the
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valuation of assets, which is the conservative option. So despite introduction of IAS/IFRS standards, which cheer an economic view highlights by the substance over form principle, the traditional conservatism approach stays embedded in French practices. Many factors could encourage groups to keep on using historical costs:
y y y

Resistance to change Implementation complexity Uncertainty about fair value effects

This industry is trained to buy and to sell investment properties. This fact could have encouraged her to adopt fair value.

4. Topic-Are IFRS and US-GAAP already comparable? Author: Chunhui Liu Published Year: 2009 As per this research paper, SEC (the U.S. Securities and Exchange Commission) release no. 33-8879 eliminated the need for US listed foreign companies that prepare financial statements in accordance with IFRS (International Financial Reporting Standards) as issued by the International Accounting Standards Board (IASB) to reconcile their financial statements to USGAAP (U.S. generally accepted accounting principles). This study updated the literature on changes in the difference between IFRS and US-GAAP and their value relevance. The evidence showed that net income reported per IFRS as endorsed by EU (European Union) had significantly increased in comparability to that per US-GAAP from 2004 to 2006. However, reconciliation from IFRS to US -GAAP for reported net income was still found to be value relevant. In addition, the comparability between net asset per IFRS and that per US-GAAP was yet to be enhanced. Significant difference was found between IASBIFRS (IFRS as issued by International Accounting Standards Board) and EUIFRS (IFRS as endorsed by European Union) reported net income in their comparability to US-GAAP reported net income.

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5. Topic-Implementing IFRS: A Case Study of the Czech Republic Author: Pat Sucher and Irena Jindrichovska Published Year: 2004 This empirical paper presented a study of the implementation process for International Financial Reporting Standards (IFRS) in one of the accession countries, the Czech Republic. Based upon a review of the legislation, institutional framework and context, and drawing upon recent interviews with Czech companies required to prepare IFRS accounts, auditors and institutional players in the Czech Republic, the paper highlighted some of the key issues that were arising with the move to the implementation of IFRS reporting for listed group companies and other enterprises in the Czech Republic. The paper considered the issues that rose while implementing new accounting regulations, some of which were not new and had been well covered in the literature, but others of which were particular to the implementation of IFRS reporting. The method of implementation, the scope of IFRS, particular issues with local accounting practice and IFRS, the issue of enforcement of compliance with IFRS and its relationship with audit, the link between IFRS reporting and taxation and the provision of education and training were all considered. There was also a review of the state of preparedness of local group listed entities with respect to the implementation of IFRS reporting. There were many potentially rich areas for accounting research where th work e could also inform the practice of IFRS accounting. The paper provides a contribution by highlighting how one country has moved to implement the requirement for group listed enterprises to prepare IFRS accounts and the issues that then arise for legislators, preparers and users. 6. Topic-An Experimental Analysis of Accounting Judgments between US GAAP and IFRS Accountants Author: Anne M. Wilkins, CPA, MACC Kennesaw State University Published Year: 2010 European and U.S. based accountants were given a case experiment requiring an accounting judgment. The U.S. accountants were more conservative than their European counterparts in applying judgments under uncertainty. As the U.S. moved towards the adoption of international accounting standards, which were more principle than rule based, the importance of judgments in decision-making and their financial statement impact was increased.
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ANALYSIS

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ANALYSIS
OBJECTIVE 1: to study the convergence of Indian GAAP with IFRS STRUCTURE OF IFRS IFRS are as principles based set of standards that establish broad rules and also dictate specific treatments. International Financial Reporting Standards comprises of
y y y

International Financial Reporting Standards (IFRS) - standards issued after 2001 International Accounting Standards (IAS) - standards issued before 2001 Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) - issued after 2001

Standing Interpretations Committee (SIC) - issued before 2001

Meaning of Convergence with IFRS The two terms though used interchangeably but there is an important difference. Adoption is process of adopting IFRS as issued by IASB, with or without modifications i.e., modifications in the nature of additional disclosures requirement or elimination of alternative treatment. It involves an endorsement of IFRS by legislative or regulatory with minor modifications done by standard setting authority of a country. Whereas Convergence- is harmonization of national GAAP with IFRS through design and maintenance of accounting standards in a way that financial statements prepared with national accoun ting standards are in compliance with IFRS. Convergence with IFRS thus implies to achieve harmony with IFRSs and to design and maintain national accounting standards in a way that they comply with the International Accounting Standards. The transition would enable Indian entities to be fully IFRS compliant and give an unreserved and explicit statement of compliance with IFRS in their financial statements. This would also lead to underpin the trust investors place in financial and nonfinancial information. In the new format core accounting principles will still apply and is simply an additional piece of accounting equation. Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS was issued between 1973 and 2001 by the Board of the International Accounting Standards

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Committee (IASC). On 1 April 2001, the new IASB took over the responsibility for setting International Accounting Standards from the IASC. During its first meeting the new Board adopted existing IAS and SICs. The IASB has continued to develop standards calling the new standards IFRS. It is simply an addition to the existing accounting rules. Convergence to IFRS, which is indeed a complex process will, brings about a change in the following:
y y y y y y

Change in existing GAAP; Changes in numbers reported; Changes to the accounting policies; Changes in procedures adopted by the company; Changes in financial reporting systems and Improving the IFRS skills for company personnel.

Either convergence or adoptions, both has important implication and will require synchronization of both internal and external reporting keeping in view that it can have a deep and wide impact on overall aspects of the organization as such mentioned below:
y y y y y

Affecting investor relations; HR rewards; Debts covenants; Performance measures; and Investors and market expectations.

India today has become an international economic force. Indian companies has surpassed in several sectors of the industry that includes, ITES, software, pharmaceutical, auto spare part to name a few. And to stay as a leader in the international market India opted the changes it need to interface Indian stakeholders', the international stakeholders' and comply with the financial reporting in a language that is understandable to all of them. In response to the need several Indian companies have already been providing their financial statements as per US GAAP and/or IFRS on voluntary basis. But, however this is becoming more of a necessity then just being a best practice.

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In the coming years, critical decisions will need to be made regarding the use of global accounting standards in India. Market participants will be called upon to determine whether achieving a uniform set of high-quality global accounting standards is feasible, what sort of investments would be required to achieve that outcome, and whether it is a desirable goal in the first place. This dialogue will be critical to the future of financial reporting and of fundamental importance to the long-term strength and stability of the global capital markets. Performance measures, based on Indian GAAP may need revisiting as it may change in IFRS adoption by fair amount on account of valuation aspect. Expectation of investor and market will also be required to be of paramount importance to manage in the adoption of process. The IFRS process in India The Indian GAAP is influenced by several standard setters and influenced by Statute, namely Companies Act, Income Tax Act, Banking Regulation Act, Insurance Act etc and directions from regulatory bodies like RBI, SEBI, and IRDA. The legal or regulatory requirement will prevail over the IFRS requirement, in case of conflicts. Therefore, pre-conditions for IFRS adoption by India to be effective need amendments in required legislation and clarity on impact of IFRS adoption on Direct and Indirect taxes, especially transactions recorded at fair values. Institute of Chartered Accountants of India is actively promoting the IASB's pronouncements in the country with a view to facilitating global harmonization of Accounting Standards and ICAI has pronounced that Indian GAAP will converge into IFRS with effect from April 1, 2013. Under the statutory mandate provided by the Companies Act, 1956 the Central Government of India prescribes accounting standards in consultation with National Advisory Committee on Accounting Standards (NACS) established under the Companies Act, 1956. The Central Government notified 28 Accounting Standards (AS 1 to 7 and AS 9 to 29) in December 2006 in the Form of Companies (Accounting Standard Rules) 2006. While doing so the Central Government had adopted a policy of enabling disclosure of company account in a manner at par with accepted international practices, through a process of convergence with the IFRS. The NACS has taken up initiative for harmonization of accounting standards with IFRS would be continued with an intention of achieving convergence with IFRS by 2013.

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Ministry of Corporate Affairs has also set up a high powered group com prising of various stakeholders under the Chairmanship of Mr. Anurag Goel, Secretary to discuss and resolve implementation challenges with regard to convergence of Indian Accounti g Standards with n IFRS from 2013. In November 2009 SEBI decided to provide an option to all listed entities with subsidiaries to submit their consolidated financial statements as per IFRS to be in line with objectiv of e convergence to IFRS by 2013. On anuary 22, 2010, the Ministry of Corporate Affairs issued a press release whi h laid out a c phased plan by which IFRS convergence will be achieved in India for companies other than Banking and Insurance Companies. This important announcement had cleared all clouds of IFRS convergence and provided the road map in phase manner for ach ieving convergence in India effective April 1, 2013. According to the above press release, there will be two separate sets of Accounting Standards under Section 211(3C) of the Companies Act, 1956. The two sets would be as described below: First set would comprise of the Indian Accounting Standards which are converged with the IFRS (IFRS converged standards). It shall be applicable to specified class of companies; Second set would comprise of the existing Indian Accounting Standards (Existing Accounting Standards) and would be applicable to other companies including small and medium companies (SMCs). The table below set out the applicability of First set of standards to specified class of companies in phase manner:

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The above enlisted specified class of companies will prepare an opening balance sheet in accordance with IFRS converged standards as of effective date and will follow the IFRS converged standards from the respective effective date as mentioned in above table. On March 31, 2010, the Ministry of Corporate Affairs issued the final road map of Convergence with IFRS for Banking and Insurance Companies also, which were excluded from the earlier notification issued on 22nd January 2010. In brief: All insurance companies will converge with Converged Indian accounting standards effective April 1, 2012. All scheduled commercial banks will converge effective April 1, 2013. A phased approach of convergence is prescribed for urban co-operative Banks. NBFC which are part of Nifty - 50, Sensex 30 and NBFCs (listed or unlisted), having net worth of more than 1,000crores will converge effectively before April 1, 2013. All other listed NBFC's and other NBFCs having a net worth in excess of Rs 500crores would converge effective April 1, 2014. Unlisted NBFCs having a net worth of less than Rs 500crores are not mandatorily required to converge but may voluntarily decide to converge. There by, now the entire road map for Convergence with IFRS is conclusively defined for all categories of companies in India. Thus, going by aforesaid directives if, corporate India needs to publish IFRS financial statements for 2011-2012, this would require comparatives for 2010-11, i.e., an opening balance sheet is required April 1, 2010. In a nutshell, this means that the real work for corporate India starts now.

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IFRS CONVERSION PROGRAMME

TABLE NO 2 Framework for the Preparation and Presentation of Financial Statements There is also a Framework for the Preparation and Presentation of Financial Statements which describes of the principles underlying IFRS. A framework is nothing but the foundation of accounting standards. The framework states that the objectives of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions, and to provide the current financial status of the entity to its shareholders and public in general. IFRS financial statements consist of (IAS1.8)

TABLE 3
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APPLICABILIT OF IFRS

TABLE 4 STRATEG FOR CONVERGENCE WITH IFRSs Formulation of convergence strategy for departure of Indian Accounting Standards from the corresponding IFRSs as well as the complexity of the recognition and measurement requirements and the extent of disclosures required in the IFRSs with a view to enforce these on various types of entities, vi ., public interest entities and other than public interest entities (otherwise known as small and medium-si ed entities) are discussed as follows by Institute of Chartered Accountants of India:

Public Interest Entities It is noted that those countries which have already adopted IFRSs, have done so primarily for public interest entities including listed and large-si ed entities. It is also noted that the International Accounting Standards Board also considers that the IFRSs are applicable to public interest entities in view of the fact that it has recently issued an Exposure Dra of a ft proposed IFRS for Small and Medium-si ed Entities3. The ICAI, therefore, is of the view that India should also become IFRS compliant only for public interest entities. With a view to determine which entities should be considered as public interest entities for the purpose of application of IFRSs, the criteria for Le el I enterprises as laid down by the Institute of Chartered Accountants of India and the definition of small and medium si ed company as per Clause 2(f) of the Companies (Accounting S tandards) Rules, 2006, as notified by the Ministry of Company Affairs (now Ministry of Corporate Affairs) in the
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Official Gazette dated December 7, 2006, were considered. But the ICAI is of the view that about four years have elapsed since the ICAI laid down the criteria for Level I enterprises so as far as the size is concerned, it needs a revision. So finally the ICAI is of the view that a public interest entity should be an entity: (i) Whose equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India; or (ii) Which is a bank (including a cooperative bank), financial institution, a mutual fund, or an insurance entity; or (iii) Whose turnover (excluding other income) exceeds rupees one hundred crores in the immediately preceding accounting year; or (iv)Which has public deposits and/or borrowings from banks and financial institutions in excess of rupees twenty five crores at any time during the immediately preceding accounting year; or (v) Which is a holding or a subsidiary of an entity which is covered in (i) to (iv) above. The ICAI is of the view that once an entity gets listed on a stock exchange it assumes the character of a public interest entity and, therefore, it would not be appropriate to exempt such entities from the application of IFRSs. Similarly, a bank, a financial institution, a mutual fund, an insurance entity and holding or subsidiary of a public interest entity also assumes the character of a public interest entity. Now the next question is whether the IFRSs should be adopted for Public Interest Entities stage-wise or all at once from a specified future date. For this the ICAI examined the IFRSs and the existing Accounting Standards with a view to determine the extent to which they differ from the IFRSs and the reasons therefore to identify which IFRSs can be adopted in near future, which IFRSs can be adopted after resolving conceptual differences with the IASB, which IFRSs can be adopted after the industry and the profession is ready in terms of the technical skills required, and which IFRSs can be adopted after the relevant laws and regulations are amended. On the basis of this examination, the ICAI has classified various IFRSs into the following five categories: Category I - IFRSs do not involve any legal or regulatory issues or have any issues with regard to their suitability in the existing economic environment, preparedness of industry and any conceptual differences from the Indian Accounting Standards. This category has further been classified into two parts as follows:

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Category I A - IFRSs can be adopted immediately as these do not have any differences with the corresponding Indian Accounting Standards. The following IFRSs have been identified in this category:
y y

IAS 11, Construction Contracts IAS 23, Borrowing Costs

Category I B - IFRSs which can be adopted in near future as there are certain minor differences with the corresponding Indian Accounting Standards. The following IFRSs have been identified in this category:
y y y y y y

IAS 2 Inventories IAS 7, Cash Flow Statements IAS20, Accounting for Government Grants and Disclosure of Government Assistance IAS 33, Earnings per Share IAS 36, Impairment of Assets IAS 38, Intangible Assets

Category II - IFRSs 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. This category also includes those IFRSs corresponding to which Indian Accounting Standards are under preparation/revision. The following IFRSs have been identified in this category:
y y y y

IAS 18, Revenue IAS 21, the Effects of Changes in Foreign Exchange Rates IAS 26, Accounting and Reporting by Retirement Benefit Plans IAS 40, Investment Property (Corresponding Indian Accounting Standard is under preparation)

IFRS 2, Share-based Payment (Corresponding Indian Accounting Standard is under preparation)

IFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Corresponding Indian Accounting Standard is under preparation)

Category III - IFRSs which have conceptual differences with the corresponding Indian Accounting Standards. This category has further been divided into two parts as follows:

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Category III A - IFRSs having conceptual differences with the corresponding Indian Accounting Standards that should be taken up with the IASB. The following IFRSs have been identified in this Category:
y y y y y y

IAS 17, Leases IAS 19, Employee Benefits IAS 27, Consolidated and Separate Financial Statements IAS 28, Investments in Associates IAS 31, Interests in Joint Ventures IAS 37, Provisions, Contingent Liabilities and Contingent Assets

Category III B - IFRSs having conceptual differences with the corresponding Indian Accounting Standards that need to be examined to determine whether these should be taken up with the IASB or should be removed by the ICAI itself. The following IFRSs have been identified in this Category:
y y y y y y

IAS 12, Income Taxes IAS 24, Related Party Disclosures IAS 41, Agriculture (Corresponding Indian Accounting Standard is under preparation) IFRS 3, Business Combinations IFRS 6, Exploration for and Evaluation of Mineral Resources IFRS 8, Operating Segments

Category IV - IFRSs, the adoption of which would require changes in laws/regulations because compliance with such IFRSs is not possible until the regulations/laws are amended. The following IFRSs have been identified in this Category:
y y y y y

IAS 1, Presentation of Financial Statements IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors IAS 10, Events after the Balance Sheet Date IAS 16, Property, Plant and Equipment IAS 32, Financial Instruments: Presentation (Exposure Draft of the Corresponding Indian Accounting Standard has been issued)

y y

IAS 34, Interim Financial Reporting IAS 39, Financial Instruments: Recognition and Measurement (Exposure Draft of the Corresponding Indian Accounting Standard has been issued)

IFRS 1, First-time Adoption of International Financial Reporting Standards

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y y

IFRS 4, Insurance Contracts IFRS 7, Financial Instruments: Disclosures

Category V - IFRSs corresponding to which no Indian Accounting Standard is required for the time being. However, the relevant IFRSs, when adopted upon full convergence, can be used as the fallback option where needed.
y

IAS 29, Financial Reporting in Hyper-inflationary Economies

For Small and Medium-sized Entities:

For the Small and Medium-sized Entities (SMEs), the following three alternatives were considered: (i) The IFRSs should be modified to provide exemptions/relaxations as has been done in the existing Accounting Standards issued by the ICAI/notified by the Government of India; (ii) The existing Accounting Standards with exemptions/relaxations as at present should continue to apply; (iii) Apply the IFRS for SMEs (the Exposure Draft of which has been issued recently) with or without modifications to suit Indian conditions. The ICAI is of the view that since the IASB itself recognises that the IFRSs are too difficult and time consuming for small and medium-sized entities, it would not be appropriate to apply the IFRSs with exemptions/relaxations to SMEs. The ICAI is also of the view that to continue to apply the existing Accounting Standards in India to SMEs with the existing exemptions/relaxations would not be appropriate as it would mean that the ICAI/the Government would have to keep on modifying the existing Accounting Standards as soon as a change is made in the corresponding IFRSs after considering the appropriateness thereof in the context of Indian SME conditions. The ICAI is, therefore, of the view that it may be appropriate to have a separate standard for SMEs. It was noted that the proposed IFRS for SMEs was still at the Exposure Draft stage and it may undergo changes when finally issued. Accordingly, whether the IFRS for SMEs should be adopted in toto or with modifications should be examined when the said IFRS is finally issued. The ICAI is of the view that a separate standard for SMEs would be more useful from the following perspectives also: (i) The small and medium-sized entities would not have to consider all the IFRSs which are too voluminous; and

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(ii) It would ensure convergence, to the extent possible, with the proposed IFRS for Small and Medium-sized Entities being issued by IASB, even for this class of entities. Thus in this context, it is noted that in order to be an IFRS-compliant country, it is not necessary to adopt the IFRS for Small and Medium-sized Entities to be issued by IASB.

Convergence with IFRS Stage-wise Approach

The ICAI examined whether convergence with IFRSs can be achieved stage wise as below: Stage I: Convergence with IFRSs falling in Category I immediately Stage II: Convergence with IFRSs classified in Category II and Category III after a certain period of time, say, 2 years after various stakeholders have achieved the level of technical preparedness and after conceptual differences are resolved with the IASB. Stage III: Convergence with IFRSs classified in Category IV only after necessary amendments are made in the relevant laws and regulations. Stage IV: Convergence with IFRSs classified in Category V by way of adoption on full convergence. The ICAI considered in-depth the stage-wise adoption approach and its views thereon are as below: (i) If some IFRSs are adopted in the initial stages and the other IFRSs are adopted later, this may result in mismatch between the requirements of the adopted IFRSs in the first stage and the accounting standards issued by ICAI/notified, corresponding to those IFRSs which are not adopted. This is because many accounting standards are inter-related. (ii) Another problem can be that IFRSs adopted in one stage may not be possible to be implemented fully until the adoption of the IFRSs to be adopted at the later stage in view of their inter-relationship. (iii) Even, at present, it is found that when one IFRS is adopted, it results in a number of changes in the corresponding Indian Accounting Standards. For example, the issuance of ED of AS 30, Financial Instruments: Recognition and Measurement, corresponding to IAS 39, Financial Instruments: Recognition & Measurement, has resulted in proposed limited revisions to many other accounting standards such as AS 2, AS 11, AS 13, AS 21, AS 23, AS 27, AS 28 and AS 29. Such an approach is fraught with the danger of missing out certain minute aspects in other standards which may also require revision. (iv) Further changes in IFRSs will also make the process more complex as with every revision in IFRS, revisions may be required in the existing Accounting Standards apart from
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the changes in the adopted IFRSs. Though IASB has decided not to issue any revised IFRS or new IFRS effective till January 1, 2009, but after that date this problem will become acute.

Convergence with IFRS All-at-once Approach In view of the above difficulties, the ICAI is of the view that it would be more appropriate to adopt all IFRSs from a specified future date as has been done in many other countries. After considering the current economic environment, expected time to reach the satisfactory level of technical preparedness and the expected time to resolve the conceptual differences with the IASB, the ICAI has decided that IFRSs should be adopted for public interest entities from the accounting periods commencing on or after 1st April, 2011. This will give enough time to all the participants in the financial reporting process to help in building the environment supporting the adoption of IFRSs. Insofar as the legal and regulatory aspects are concerned, the ICAI is of the view that, on adoption of those IFRSs, having certain requirements in conflict with the laws/regulations, the latter will prevail. The ICAI is further of the view that this approach is appropriate because to wait for full convergence until the relevant laws/regulations are amended would not be practicable as such amendments may not take place for many years. The ICAI also examined whether an entity should have a choice to become fully IFRS compliant before 1st April, 2011. The ICAI is of the view that an early adoption of IFRSs should be encouraged. However, such an adoption should be for all IFRSs and that it cannot be on selective basis. Format of converged Accounting Standards The ICAI considered whether the existing Accounting Standards should be revised to make them fully compliant with IFRSs by the specified date or on the specified date the IFRSs themselves should be adopted. In either case, Indian-specific regulatory/legal aspects may be included in a separate section, where appropriate. The ICAI is of the view that it would be more cumbersome to follow the first approach, i.e., revising the Accounting Standards. Therefore, the second approach should be, i.e., IFRSs, including the IFRS numbers, should be adopted from the specified date of 1st April, 2011. The IFRSs should be issued as Indian ASs, which would be considered IFRS-equivalent. In order to facilitate reference to the existing Indian Accounting Standards, along with the IFRS number, in the brackets, the existing Accounting Standard number may also be given.

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IFRS A BIRDS EYE VIEW

IFRS 1 First-time Adoption of International Financial Reporting Standards The objective of this IFRS is to ensure that an entitys first IFRS financial statements, and its interim financial reports for part of the period covered by those financial statements, contain high quality information that: (a) is transparent for users and comparable over all periods presented; (b) Provides a suitable starting point for accounting under International Financial Reporting Standards (IFRSs); and (c) Can be generated at a cost that does not exceed the benefits to users. An entitys first IFRS financial statements are the first annual financial statements in which the entity adopts IFRSs, by an explicit and unreserved statement in those financial statements of compliance with IFRSs. An entity shall prepare an opening IFRS balance sheet at the date of transition to IFRSs. This is the starting point for its accounting under IFRSs. An entity need not present its opening IFRS balance sheet in its first IFRS financial statements. In general, the IFRS requires an entity to comply with each IFRS effective at the reporting date for its first IFRS financial statements. In particular, the IFRS requires an entity to do the following in the opening IFRS balance sheet that it prepares as a starting point for its accounting under IFRSs: (a) Recognise all assets and liabilities whose recognition is required by IFRSs; (b) Not recognise items as assets or liabilities if IFRSs do not permit such recognition; (c) reclassify items that it recognised under previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity under IFRSs; and (d) Apply IFRSs in measuring all recognised assets and liabilities.

The IFRS grants limited exemptions from these requirements in specified areas where the cost of complying with them would be likely to exceed the benefits to users of financial statements. The IFRS also prohibits retrospective application of IFRSs in some areas; particularly where retrospective application would require judgements by management about past conditions after the outcome of a particular transaction is already known.

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The IFRS requires disclosures that explain how the transition from previous GAAP to IFRSs affected the entities reported financial position, financial performance and cash flows. IFRS 2 Share-based Payment The objective of this IFRS is to specify the financial reporting by an entity when it undertakes a share-based payment transaction. In particular, it requires an entity to reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted to employees. The IFRS requires an entity to recognise share-based payment transactions in its financial statements, including transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the entity. There are no exceptions to the IFRS, other than for transactions to which other Standards apply. This also applies to transfers of equity instruments of the entitys parent, or equity instruments of another entity in the same group as the entity, to parties that have supplied goods or services to the entity. The IFRS sets out measurement principles and specific requirements for three types of sharebased payment transactions: (a) equity-settled share-based payment transactions, in which the entity receives goods or services as consideration for equity instruments of the entity (including shares or share options); (b) cash-settled share-based payment transactions, in which the entity acquires goods or services by incurring liabilities to the supplier of those goods or services for amounts that are based on the price (or value) of the entitys shares or other equity instruments of the entity; and (c) Transactions in which the entity receives or acquires goods or services and the terms of the arrangement provide either the entity or the supplier of those goods or services with a choice of whether the entity settles the transaction in cash or by issuing equity instruments. For equity-settled share-based payment transactions, the IFRS requires an entity to measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity

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is required to measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. Furthermore: (a) For transactions with employees and others providing similar services, the entity is required to measure the fair value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of employee services received. The fair value of the equity instruments granted is measured at grant date. (b) For transactions with parties other than employees (and those providing similar services), there is a rebuttable presumption that the fair value of the goods or services received can be estimated reliably. That fair value is measured at the date the entity obtains the goods or the counterparty renders service. In rare cases, if the presumption is rebutted, the transaction is measured by reference to the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders service. (c) for goods or services measured by reference to the fair value of the equity instruments granted, the IFRS specifies that vesting conditions, other than market conditions, are not taken into account when estimating the fair value of the shares or options at the relevant measurement date (as specified above). Instead, vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted is based on the numbe of r equity instruments that eventually vest. Hence, on a cumulative basis, no amount is recognised for goods or services received if the equity instruments granted do not vest because of failure to satisfy a vesting condition (other than a market condition). (d) the IFRS requires the fair value of equity instruments granted to be based on market prices, if available, and to take into account the terms and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated, using a valuation technique to estimate what the price of those equity instruments would have been on the measurement date in an arms length transaction between knowledgeable, willing parties. (e) The IFRS also sets out requirements if the terms and conditions of an option or share grant are modified (e.g. an option is reprised) or if a grant is cancelled, repurchased or replaced with another grant of equity instruments. For example, irrespective of any modification, cancellation or settlement of a grant of equity instruments to employees, the IFRS generally requires the entity to recognise, as a minimum, the services received measured at the grant date fair value of the equity instruments granted.
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For cash-settled share-based payment transactions, the IFRS requires an entity to measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity is required to premeasure the fair value of the liability at each reporting date and at the date of settlement, with any changes in value recognised in profit or loss for the period. For share-based payment transactions in which the terms of the arrangement provide either the entity or the supplier of goods or services with a choice of whether the entity settles the transaction in cash or by issuing equity instruments, the entity is required to account for that transaction, or the components of that transaction, as a cash-settled share-based payment transaction if, and to the extent that, the entity has incurred a liability to settle in cash (or other assets), or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred. The IFRS prescribes various disclosure requirements to enable users of financial statements to understand: (a) The nature and extent of share-based payment arrangements that existed during the period; (b) How the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined; and (c) The effect of share-based payment transactions on the entitys profit or loss for the period and on its financial position.

IFRS 3 Business Combinations

The objective of this IFRS is to specify the financial reporting by an entity when it undertakes a business combination. A business combination is the bringing together of separate entities or businesses into one reporting entity. The result of nearly all business combinations is that one entity, the acquirer, obtains control of one or more other businesses, the acquiree. If an entity obtains control of one or more other entities that are not businesses, the bringing together of those entities is not a business combination. This IFRS: (a) Requires all business combinations within its scope to be accounted for by applying the purchase method.

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(b) Requires an acquirer to be identified for every business combination within its scope. The acquirer is the combining entity that obtains control of the other combining entities or businesses. (c) Requires an acquirer to measure the cost of a business combination as the aggregate of: the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree; plus any costs directly attributable to the combination. (d) Requires an acquirer to recognise separately, at the acquisition date, the acquirees identifiable assets, liabilities and contingent liabilities that satisfy the following recognition criteria at that date, regardless of whether they had been previously recognised in the acquirees financial statements: (i) In the case of an asset other than an intangible asset, it is probable that any associated future economic benefits will flow to the acquirer, and its fair value can be measured reliably; (ii) In the case of a liability other than a contingent liability, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and its fair value can be measured reliably; and (iii) In the case of an intangible asset or a contingent liability, its fair value can be measured reliably. (e) Requires the identifiable assets, liabilities and contingent liabilities that satisfy the above recognition criteria to be measured initially by the acquirer at their fair values at the acquisition date, irrespective of the extent of any minority interest. (f) Requires goodwill acquired in a business combination to be recognised by the acquirer as an asset from the acquisition date, initially measured as the excess of the cost of the business combination over the acquirers interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities recognised in accordance with (d) above. (g) Prohibits the amortisation of goodwill acquired in a business combination and instead requires the goodwill to be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired, in accordance with IAS 36 Impairment of Assets. (h) requires the acquirer to reassess the identification and measurement of the acquirees identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the business combination if the acquirers interest in the net fair value of the items recognised in
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accordance with (d) above exceeds the cost of the combination. Any excess remaining after that reassessment must be recognised by the acquirer immediately in profit or loss. (i) Requires disclosure of information that enables users of an entitys financial statements to evaluate the nature and financial effect of: (i) Business combinations that were effected during the period; (ii) Business combinations that were effected after the balance sheet date but before the financial statements are authorised for issue; and (Iii) Some business combinations that were effected in previous periods. (j) Requires disclosure of information that enables users of an entitys financial statements to evaluate changes in the carrying amount of goodwill during the period.

A business combination may involve more than one exchange transaction, for example when it occurs in stages by successive share purchases. If so, each exchange transaction shall be treated separately by the acquirer, using the cost of the transaction and fair value information at the date of each exchange transaction, to determine the amount of any goodwill associated with that transaction. This results in a step-by-step comparison of the cost of the individual investments with the acquirers interest in the fair values of the acquirees identifiable assets, liabilities and contingent liabilities at each step. If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is affected because either the fair values to be assigned to the acquirees identifiable assets, liabilities or contingent liabilities or the cost of the combination can be determined only provisionally, the acquirer shall account for the combination using those provisional values. The acquirer shall recognise any adjustments to those provisional values as a result of completing the initial accounting: (a) Within twelve months of the acquisition date; and (b) From the acquisition date. IFRS 4 Insurance Contracts The objective of this IFRS is to specify the financial reporting for insurance contracts by any entity that issues such contracts (described in this IFRS as an insurer) until the Board completes the second phase of its project on insurance contracts. In particular, this IFRS requires:

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(a) Limited improvements to accounting by insurers for insurance contracts. (b) Disclosure that identifies and explains the amounts in an insurers financial statements arising from insurance contracts and helps users of those financial statements understand the amount, timing and uncertainty of future cash flows from insurance contracts. An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. The IFRS applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other IFRSs. It does not apply to other assets and liabilities of an insurer, such as financial assets and financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement. Furthermore, it does not address accounting by policyholders. The IFRS exempts an insurer temporarily from some requirements of other IFRSs, including the requirement to consider the Framework in selecting accounting policies for insurance contracts. However, the IFRS: (a) Prohibits provisions for possible claims under contracts that are not in existence at the reporting date (such as catastrophe and equalisation provisions). (b) Requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets. (c) Requires an insurer to keep insurance liabilities in its balance sheet until they are discharged or cancelled, or expire, and to present insurance liabilities without offsetting them against related reinsurance assets. The IFRS permits an insurer to change its accounting policies for insurance contracts only if, as a result, its financial statements present information that is more relevant and no less reliable, or more reliable and no less relevant. In particular, an insurer cannot introduce any of the following practices, although it may continue using accounting policies that involve them: (a) Measuring insurance liabilities on an undiscounted basis. (b) Measuring contractual rights to future investment management fees at an amount that exceeds their fair value as implied by a comparison with current fees charged by other market participants for similar services. (c) Using non-uniform accounting policies for the insurance liabilities of subsidiaries.

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The IFRS permits the introduction of an accounting policy that involves remeasuring designated insurance liabilities consistently in each period to reflect current market interest rates (and, if the insurer so elects, other current estimates and assumptions). Without this permission, an insurer would have been required to apply the change in accounting policies consistently to all similar liabilities. The IFRS requires disclosure to help users understand: (a) The amounts in the insurers financial statements that arise from insurance contracts. (b) The amount, timing and uncertainty of future cash flows from insurance contracts.

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

The objective of this IFRS is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. In particular, the IFRS requires: (a) Assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and (b) Assets that meet the criteria to be classified as held for sale to be presented separately on the face of the balance sheet and the results of discontinued operations to be presented separately in the income statement. The IFRS: (a) Adopts the classification held for sale. (b) Introduces the concept of a disposal group, being a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. (c) Classifies an operation as discontinued at the date the operation meets the criteria to be classified as held for sale or when the entity has disposed of the operation. An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and
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complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, except as permitted by paragraph 9, and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and (a) Represents a separate major line of business or geographical area of operations, (b) Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or (c) Is a subsidiary acquired exclusively with a view to resale. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use. An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned. This is because its carrying amount will be recovered principally through continuing use.

IFRS 6 Explorations for and Evaluation of Mineral Resources The objective of this IFRS is to specify the financial reporting for the exploration for and evaluation of mineral resources. Exploration and evaluation expenditures are expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration for and evaluation of mineral resources is the search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource.

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Exploration and evaluation assets are exploration and evaluation expenditures recognised as assets in accordance with the entitys accounting policy. The IFRS: (a) Permits an entity to develop an accounting policy for exploration and evaluation assets without specifically considering the requirements of paragraphs 11 and 12 of IAS 8. Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before adopting the IFRS. This includes continuing to use recognition and measurement practices that are part of those accounting policies. (b) Requires entities recognising exploration and evaluation assets to perform an impairment test on those assets when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount. (c) Varies the recognition of impairment from that in IAS 36 but measures the impairment in accordance with that Standard once the impairment is identified. An entity shall determine an accounting policy for allocating exploration and evaluation assets to cash-generating units or groups of cash-generating units for the purpose of assessing such assets for impairment. Each cash-generating unit or group of units to which an exploration and evaluation asset is allocated shall not be larger than an operating segment determined in accordance with IFRS 8 Operating Segments. Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount, an entity shall measure, present and disclose any resulting impairment loss in accordance with IAS 36. One or more of the following facts and circumstances indicate that an entity should test exploration and evaluation assets for impairment (the list is not exhaustive): (a) The period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed. (b) Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. (c) Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.

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(d) Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. An entity shall disclose information that identifies and explains the amounts recognised in its financial statements arising from the exploration for and evaluation of mineral resources.

IFRS 7: Financial Instruments: Disclosures The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate: (a) The significance of financial instruments for the entitys financial position and performance; and (b) The nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity manages those risks.

The qualitative disclosures describe managements objectives, policies and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management personnel. Together, these disclosures provide an overview of the entity's use of financial instruments and the exposures to risks they create. The IFRS applies to all entities, including entities that have few financial instruments (e.g. a manufacturer whose only financial instruments are accounts receivable and accounts payable) and those that have many financial instruments (e.g. a financial institution most of whose assets and liabilities are financial instruments). When this IFRS requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the balance sheet. The principles in this IFRS complement the principles for recognising, measuring and presenting financial assets and financial liabilities in IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement.

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IFRS 8: Operating Segments In November 2006 the IASB issued IFRS 8, Operating Segments. The issue of this international financial reporting standard (IFRS) is as a result of ongoing dialogue between the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). IFRS8 is very close to SFAS 131 - the equivalent US standard. It would appear that one of the reasons for the changed standard was a goodwill gesture to the US authorities in order to facilitate a speedy removal of the 'reconciliation requirement' that is currently in place for entities seeking a listing on the US capital markets. The scope of the standard: IFRS 8 applies to the financial statements of any entity whose debt or equity instruments are traded in a public market or who is seeking to issue any class of instruments in a public market. Other entities that choose to disclose segment information should make the disclosures in line with IFRS 8 if they describe such disclosures as 'segment information'.

Identification of operating segments: IFRS 8 defines an operating segment as a component of an entity:

y y

that engages in revenue earning business activities Whose operating results are regularly reviewed by the chief operating decision maker. The term 'chief operating decision maker' is not as such defined in IFRS8 as it refers to a function rather than a title. In some entities the function could be fulfilled by a group of directors rather than an individual and

For which discrete financial information is available.

This definition means that not every part of an entity is necessarily an operating segment. IFRS 8 quotes the example of a corporate headquarters that may earn no or incidental revenues and so would not be an operating segment. Some commentators have criticized the 'management approach' as leaving segment identification too much to the discretion of the entity and therefore hindering comparability between financial statements of different entities.

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Identification of reportable segments: Once an operating segment has been identified the entity needs to report segment information if the segment meets any of the following quantitative thresholds:
y

its reported revenue (external and inter-segment) is 10% or more of the combined revenue, internal and external, of all operating segments

its reported profit or loss is 10% or more of the greater, in absolute amount, of (i) the combined profit of all operating segments that did not report a loss and (ii) the combined loss of all operating segments that reported a loss or

Its assets are 10% or more of the combined assets of all operating segments.

IFRS 8 states that if the total external turnover reported by the operating segments identified by the size criteria is less than 75% of total entity revenue then additional segments need to be reported on until the 75% level is reached. If segments have similar economic characteristics then they can be aggregated into a single operating segment and viewed together for the purposes of the size criteria. IFRS 8 requires that current period and comparative segment information be reported consistently. This means that if a segment is identified as reportable in the current period but was not in the previous period then equivalent comparative information should be presented unless it would be prohibitively costly to obtain. IFRS 8 gives entities discretion to report information regarding segments that do not meet the size criteria. Entities can report on such segments where, in the opinion of management, information about the segment would be useful to users of the financial statements. Disclosures by reportable operating segments IFRS 8 provides a framework on which to base the reported disclosures. 1. Entities are required to provide general information on such matters as how the reportable segments are identified and the types of products or services from which each reportable segment derives its revenue. 2. Entities are required to report a measure of profit or loss and total assets for each reportable segment. Both should be based on the information provided to the chief
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operating decision maker. If the chief operating decision maker is regularly provided with information on liabilities for its operating segments then these liabilities should also be reported on a segment basis. IFRS 8 specifies disclosures that are needed regarding profit or loss and assets where the amounts are included in the measure of profit or loss and total assets:
o o

Revenues - internal and external. Interest revenues and interest expense. These must not be netted off unless the majority of a segment's revenues are from interest and the chief operating decision maker assesses the performance of the segment based on net interest revenue.

o o o

Depreciation and amortization. Material items of income and expense disclosed separately. Share of profit after tax of, and carrying value of investment in, entities accounted for under the equity method. Material non-cash items other than depreciation and amortization. The amount of additions to non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.

o o

The measurement basis for each item separately reported should be the one used in the information provided to the chief operating decision maker. The internal reporting system may use more than one measure of an operating segment's profit or loss, or assets or liabilities. In such circumstances the measure used in the segment report should be the one that management believes is most consistent with those used to measure the corresponding amounts in the entity's financial statements. Entities are required to provide a number of reconciliations:
y y y y

the total of the reportable segments' revenues to the entity's revenue the total of the reportable segments' profit or loss to the entity's profit or loss the total of the reportable segments' assets to the entity's assets where separately identified, the total of the reportable segments' liabilities to the entity's liabilities and
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The total of the reportable segments amounts for every other material item disclosed to the corresponding amount for the entity.

Entity-wide disclosures:

nless otherwise provided in the segment report IFRS 8 requires

entities to provide information about its revenue on a geographical and class of business basis. Entities also need to provide information on non -current assets on a geographical basis, but not on a class of business basis. If revenues from single external customer amount to 10% or more of the total revenue of the entity then the entity needs to disclose that fact plus:
y y

The total revenue from each customer (although the name is not needed) and The segment or segment reporting the revenues.

The entity-wide disclosures are needed even where the entity has only a single operating segment, and therefore does not effectively segment report. IFRS 9: Financial Instruments (replacement of IAS 39) (Significant for Banks and Financial Institutions) The IASBs tentative project plan for the replacement of IAS 39 consists of three main phases:

A few definitions:

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Held to Maturity Classification:

y y y

Banks have to invest in government securities to comply with RBIs prudential norms As per current RBI rules, such investments are accounted for at amortized cost. Under IFRS 9, these securities may have to be accounted for on a fair value basis, with the fair value changes taken to the income statement.

Under IFRS 9, when there are more than an infrequent number of sales in a portfolio, the entire portfolio would have to be accounted for at fair value, since the banks business model is not to hold the securities to maturity.

Loans and Receivables:

y

Under IFRS 9, loans and receivable portfolio are accounted on amortized cost basis, provided these loans do not contain any exotic embedded derivatives

Basic embedded derivatives, such as caps and floor or normal prepayment or extension terms, do not taint amortization accounting

A loan with a convertible option is also not eligible for amortization accounting and will have to be accounted for on a fair value basis with changes taken to the income statement

Loan portfolio is accounted for on a fair value basis in cases where banks transfer/securitize their loan portfolio

y y

Amortization accounting is also not allowed for certain non-recourse loans For example : when a loan to a real estate developer states that the principal and interest on the loan are repayable solely from the sale proceeds of a specific real estate

In such cases, the contractual cash flow characteristics is not met and hence, such loans are accounted on a fair value basis.

Equity Instruments:
y

Under RBI norms, investment in equity instruments (other than subsidiaries, joint ventures), are marked to market

y y y

Net losses are recognized but net gains are ignored Under IFRS 9, investments in equity instruments are fair valued The gains or losses are either recognized in the income statement or in a reserve account
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That choice is required to be made at the inception, on an instrument by instrument basis, and is irrevocable.

Impairment of Loans (The upcoming standard.)

y

The IASBs proposed standard on Impairment of loans is looking at a model that is based on expected losses rather than incurred losses

In other words, the proposed standard requires estimated credit losses to be included in the determination of the effective interest rate, for purposes of amortization accounting

y y

It will lead to significant increase subjectivity and judgment Estimation of future cash flows after adjusting for credit losses would be operationally challenging and would need significant modification to the IT systems

To meet the requirements of regular fair valuation (where amortization accounting test is failed), banks would need to employ in-house valuation experts

Adoption of the expected cash flow approach would, potentially, reduce profitability for expanding loan books in earlier years due to the inclusion of expected credit losses in the computation of interest revenue and would thus diminish banks ability to pay dividends.

Source: www.iasb.org REVIEW: The previous part of the analysis focuses on the in depth study of the convergence of Indian GAAP with IFRS. It starts with the meaning of convergence and the entire process of how the convergence with IFRS in India has been planned by the concerned regulatory bodies. The phase wise convergence with the effective date for the category of companies has been clearly mentioned. The convergence programme would start with the diagnosis part and designing of different training programmes for professionals with the convert budgets etc, would be the second step of the IFRS convergence programme. Then implementation of the entire process would be done so as to get the required fruitful outcomes. The framework of the preparation and presentation of financial statements is then specified with the applicability of IFRS. IFRS is applicable to all listed companies, banking companies, financial institutions, scheduled commercial banks, insurance companies and NBFCs. The strategy for the convergence with IFRS for different entities and its approaches would help us know how to best implement the process on the respective concern. Then an explanation on
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each module of IFRS (i.e., from IFRS 1 to 9) has been properly explained. This shows how the primitive method of accounting is modified and the new process is going to affect our financial statements henceforth.

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OB ECTIVE 2: To know the benefits of con ergence of Indian GAAP with IFRS.

Beneficiaries of con ergence with IFRS

There are many beneficiaries to the convergence of Indian GAAP with IFRS like economy, investors, industry, accounting professionals and also the company itself.

TABLE 5 The In estors: Convergence with IFRS makes accounting information more reliable, relevant, timely and comparable across different legal frameworks and requirements as it would then be prepared using a common set of accounting standards thus facilitating the investors outside India. Convergence with IFRS also develops better understandi g of n financial statements globally and develops increased confidence among the investors. The Industry: The industry would be benefitted in several ways from the convergence of IFRS and Indian GAAP.
y y y

increased confidence in the minds of the foreign investors, decreased burden of financial reporting, it would simplify the process of preparing the individual and group financial statements,

It would lead to lower cost of preparing the financial statemen using different sets of ts accounting standards.

Accounting Professionals: Although there would be initial problems but convergence with IFRS would definitely benefit the accounting professionals as the later would then be able to sell their expertise in various parts of the world. India is going to get many opportunities of

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outsourcing of the accounting and financial statements preparation from companies across the globe. The Corporate world: Convergence with IFRS would raise the reputation and relationship of the Indian corporate world with the international financial community. The benefits to the corporate world can be as follows:
y

achievement of higher level of consistency between the internal and external reporting because of better access to international market,

Convergence with IFRS would improve the risk rating and would thereby make the corporate world more competitive globally as their comparability with the international competitors increases.

The Economy: The benefit to the Indian corporate, individual investors, industry as a whole and also to the Government would lead to a growth in the economy. Moreover the international comparability also improves benefiting the industrial and capital markets in the country.

Benefits of Adopting IFRS:

Globalisation has prompted more and more countries to open their doors to foreign investment and as businesses expand across borders the need arises to recognise the benefits of having commonly accepted and understood financial reporting standards. Following are some of the benefits of adopting IFRS:
y y y y y y y

Improved access to international capital markets Lower cost of capital Benchmarking with global peers Enhanced brand value Avoidance of multiple reporting Reflecting true value of acquisitions Transparency in reporting

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REVIEW: The analysis of Objective 2 shows how IFRS has impact on many people and also the economy as a whole. Its benefits have brought a lot of popularity of this common accounting concept among nations worldwide.

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OBJECTIVE 3: To study the challenges, risks and overall impact specific to Indian Industry in adoption of IFRS. CHALLENGES IN THE CONVERGENCE WITH IFRS FACED BY INDIA The various benefits are tempting the policy makers in India to follow IFRS and it is expected that a large number of Indian companies would follow IFRS from 2011. The convergence with IFRS is not just a technical exercise but also involves an overall change in not only the perspective but also the very objective of accounting in the country. But there are also a number of challenges that India is likely to face while dealing with convergence with IFRS. The first and far most would be from the differences between Indian GAAP and IFRS. The preparers, users and auditors will continue to encounter practical implementation challenges after the execution of IFRS. Financial reporting issues would extend to various significant business and regulatory matters like:
y y y y y y

structuring of ESOP schemes, training of employees, tax planning, modification of IT system, compliance with debt covenants Educating investors to understand the changed financial reporting's under IFRS

Therefore, to overcome the challenges, a Core Group has been constituted by Indian regulatory to identify inconsistencies between IFRS and as listed below:
y y y y

Companies Act SEBI Regulations Banking Laws & Regulations, and Insurance Laws & Regulations.

One of the big impediments to implementation of IFRS in India is in the case of Mergers and Acquisitions where the High Court approval is required. The High Court has got the authority to stay application of accounting standards or to prescribe accounting requirements in the case of merger and amalgamation situations. All this would deter smooth transition to

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IFRS in India. Besides, deferral of VRS cost or ESOP accounting being based on intrinsic method, though a departure from IFRS is essential bearing in mind the needs and requirements of the Indian economy. The RBI also prescribes accounting requirements for banks, such as accounting for derivatives or provision for non-performing assets, and these requirements of the RBI are currently at variance with the IFRS. Managements compensation, stock options, debt covenants, tax liability and distributable profits are all based on Indian GAAP and AS (Accounting Standards) at present. Now all the salary structure, compensation structure will have to be renegotiated by most senior employees who have variable methods of compensation. For example, the variable pay component of most TCS employees is about 30 % of the total compensation package and this variable pay being based on items of Profit/Loss Account which will be defined differently under IFRS, the entire compensation package will need to be revised. There are many areas where the differences lie between the Indian GAAP and IFRS. For example, fixed assets accounting, presentation of financial statements, accounting of financial instruments and foreign exchange, group accounts etc. Thus Indian GAAP is a long way behind IFRS. In spite of many favourable points of convergence with IFRS, deviations are bound to exist due to various conceptual, practical, legal and implementation challenges that cause unavoidable reasons for departures from IFRS. The challenges are:
1.

Maintaining consistency with the legal and the regulatory requirements prevalent in India. The macro environment of the country where it is applied is another important reason for departure from IFRS. There has been reluctance in India to adopt fair value approach in measurement of various assets and liabilities where as IFRS is based on the fair value approach.

2.

3.

Everybody is reluctant to change and this is a universal fact. Thus the unhelpful attitude of corporate world poses another challenge in convergence with IFRS standards.

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4.

Similarly implementation challenges also crop in the convergence with IFRS because of complexities of the recognition and measurement requirements and the extent of disclosures required by IFRS on different types of entities that are public interest and other than public interest entities.

Indian Standards remain sensitive to local conditions, including the legal and economic environment so it would become very difficult for the economy to converge into IFRS. Risks involved in Introducing IFRS in India
y

Implementing IFRS has increased financial reporting risk due to technical complexities, manual workarounds and management time taken up with

implementation.
y

Another risk involved is that the IFRS do not recognize the adjustments that are prescribed through court schemes and consequently all such items will be recorded through income statement.

In IFRS framework, treatment of expenses like premium payable on redemption of debentures, discount allowed on issue of debentures, underwriting commission paid on issue of debentures etc is different than the present method used. This would bring about a change in income statement leading to enormous confusion and complexities. IFRS will introduce changes in the very concepts and definitions of in a few areas like change in the definition of 'equity'. This would result in tax benefits of hybrid instruments where 'interest' is treated as receiving a dividend.

At the ground level, it will be difficult for the small and medium firms and the accounting companies to keep pace with the process of convergence with IFRS and it will be more challenging for them. Basically the idea is that it should be made mandatory for the companies to prepare consolidated financial statements which would require them to provide information about their unlisted companies as well under IFRS.

IFRS financial statements are significantly more complex than financial statements based on Indian GAAP. This complexity threatens to undermine the usefulness of IFRS financial statements in making decisions. The risk is that the preparation of financial reports will become just a technical compliance exercise rather than a mechanism for communicating performance and the financial position of companies.

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Laws and pronouncements are always country specific and no country can abandon its own laws altogether. It will always be checked to see if the IFRS pronouncements fit for application in a particular country and its environment.

In fact it is not yet very clear whether IFRS would be directly adopted or will they converge into Indian GAAP. This also shows our unpreparedness towards the convergence process. Impact Assessment As per the Mr. Jamil Khatri, Head of Accounting Advisory Services, KPMG, the new converged standards essentially serve the same objectives as the previous standards that of providing timely and useful financial information about companies for stakeholders to assist in decision-making. However, there are likely to be significant changes in the recognition, measurement, disclosure and presentation of various aspects of items in the financial statements. Various stakeholders will be impacted by the transition to IFRS so the stakeholders want to understand how this change affects them. Similarly, management of companies would also like to address the requirements of stakeholders in a smooth and meaningful manner. As rightly known the stakeholders who need to understand the financial statements would be affected in one way or the other. These would be internal or external stakeholders. Internal stakeholders include:
y y y y

the management of the company, audit committee, board of directors (including independent directors), and employees

And external stakeholders include:

y y y y y

investors (current and potential shareholders), lenders, regulators, research analysts and credit rating agencies
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All these stakeholders use the financial statements for a variety of purposes and therefore changes in the reported financial statements due to transition to IFRS would need to be understood by them for their decision-making. So the companies need to work so as to ensure that their stakeholders will be appropriately prepared to understand and use the financial statements under IFRS. Thus the main focus would be to:
y

Understanding what external stakeholders may want to know and how they use financial statements,

y y

Recognising that communication is important, Identifying matters that need resolution for their understanding and providing information on a timely basis, and

Understand that the users of financial statements may not always be accountants and, therefore, would need to be explained the impact of implementation of IFRS in a simple language.

It is highly likely that the reported profitability and other financial parameters, such as net worth, debt-equity ratio and current ratio, may be different under IFRS compared with the Indian GAAP. Setting the expectation of stakeholders for the anticipated changes would ensure that the stakeholders understand the impact in the right perspective. For example, some of the investments may be recorded under IFRS at fair value with the movement of fair values between different periods reported in equity or the income statement. Currently, such investments may be reported at cost. While the underlying business situations continue to be the same, the fact that the movement in fair values is recorded through the income statement in the future may affect the profitability of the company. Now, the investors should understand that this is additional financial information available. Though the reported profit may be different, such situation existed even under the Indian GAAP though not reported in the same manner. It is also unclear currently if the ability of companies to pay dividends would be dependent on the profits reported under IFRS financial statements or a different formula would be set for determining distributable profits. This may affect all investors.

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It is important that the stakeholders feel confident that a company is not only effectively managing the transition to IFRS, but is also helping them to anticipate and understand the change that may arise as not managing the expectation may lead to some kneejerk reactions. Therefore, providing effective and timely communication should help companies mitigate this risk. The stakeholders should be communicated early, but not too early about what's going on with the IFRS transition. Messages need to be direct, properly timed and appropriately comprehensive. Indian companies are fortunate that they could learn from the experience of other economies such as the European Union and Australia. Communication is most effective when the impact is clearly understood by the management and the company so that the message is clear and appropriate. The audit committees and board of directors recommend and approve the financial statements of companies and, therefore, they need to know and understand what they are approving. In addition, there would also be several areas where there would be significant exercise of judgment by management, for example:
y y y y

estimating the useful life of assets, identification of significant components in assets, estimates of fair values for investments and other financial instruments, Election of exemptions and accounting policies from several choices available, etc.

While approving such decisions, the directors need to be knowledgeable enough to understand the implications of each of these matters so that they make appropriate decisions. In the current environment where financial reporting by companies is under significant scrutiny by investors, analysts, regulators & directors have a heightened sense of responsibility for financial reporting. IFRS affect the employees in general because IFRS may impact the reported profits and often a portion of employee incentives are linked to the companys profits. Other employees in the finance function would need to know IFRS implications in greater details as they need to prepare the financial statements.

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Apart from the need to prepare and explain the IFRS financial statements, management also have to set up the processes, for example IT process, MIS and budgeting process and make changes to the processes. Understanding of IFRS would be required in the day-to-day decision making of the management, for example, their ability to raise funds, mergers and acquisitions activity, and the structure of business contracts. As most external stakeholders would be unprepared, a company would need to anticipate difficulty in the first year of IFRS convergence due to use of a different accounting language. It is possible that some companies may start voluntary disclosing some information and impact of IFRS on a pro-forma basis to the capital markets or investors even before the mandatory date of transition to IFRS so as to make a good start. Thus an entity may use this IFRS transition as an opportunity to enhance ongoing stakeholder communication rather than treating it as a one-off exercise. Impact assessment is an enabler to produce IFRS financial statements that compare to and eventually replace an entitys current financial statements. However, it is equally important for the entity to see how IFRS information will affect the perception of its business performance. Business Re-engineering Converting is not just a technical exercise. It provides executives with opportunities to challenge the way in which their organization is viewed and evaluated by investors, other key stake-holders and competitors. Every important decision that an entity makes will be affected by IFRS, making it essential for the management to anticipate changes in the market perception.

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The Impact of IFRS on Indian Industries

Impact on Real Estate Industry: According to the stringent revenue recognition norms laid down by the IFRS, all real estate companies that form part of the NSEs Nifty-50 or BSEs Sensex-30 will have to report financial returns. As per researchers Indian real estate companies are booking revenues even before they start the construction because of the currently used percentage of completion method of accounting, which allows companies to book revenues provided an agreement of sale has been signed with the buyer and thus a specified percentage of the project cost has been incurred. As a result, Indian real estate companies revenues are higher by as much as 30% as compared to the work done by them. For years, developers in India have been recognising revenue the moment an agreement for sale of a flat is signed. They do this after completing about 20-25% of the total construction work, mainly to assure investors that the project is safe. So, under Indias Generally Accepted Accounting Principles (GAAP), revenue is earned the moment an under-construction flat is booked. However, under the IFRS, only when an apartment is constructed and ownership rights are transferred will revenue from such transaction be recognised. Thus it is a challenge to follow the new accounting norms as there will be shortfall of revenue in some quarters. In the first phase of the roll-out, the IFRS norms will impact companies with net worth of over Rs 1,000crore or those who have issued Foreign Currency Convertible Bonds (FCCBs) or Global Depository Receipts (GDRs). And also developers would not find it acceptable to pay tax on a notional basis when there is no revenue recognition in the books. However, the Institute of Chartered Accountants of India (ICAI) has decided not to exempt any sector/industry from adopting these standards as it could trigger off an avalanche of such requests from sectors like banking. Thus it is believed that the adoption of International Financial Reporting Standards (IFRS) will reflect more appropriately the revenues of Indian real estate developers and their ability to deliver projects and will also deal with the market risks that are related to real estate projects more effectively than the percentage completion method. The revenue recognition is thus a major challenge, which is not accepted even in some of the developed countries like
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US and moreover Singapore has not accepted the method and they are continuing with the percentage completion method. The Current Revenue Recognition Policies of IFRS will also allow revenue booking ahead of construction. According to the percentage of completion method, developers can recognise revenues in proportion to the construction cost incurred in a year, provided the ownership of the apartment has been transferred to the buyer. Furthermore, land cost is allowed to be part of construction cost and the agreement of sale between buyer and seller is supposed to transfer the ownership to the buyer. For example: to calculate the percentage of completion accounting method of a project, which has total cost of $100 (of which $30 is the land cost) and revenue of $120, if a developer has incurred 30% of the total cost ($30), he/she can recognise 30% of revenue (i.e., $36). Since the land costs are usually a part of the construction cost, developers can recognise this revenue even prior to starting any construction. Hence, developers have started using this provision to their advantage and have started booking revenues for projects even before any construction commenced. Thus the revenues recognised by leading Indian real estate companies were significantly higher than the cash received from customers in the year 2008. Ideally, revenues should be close to the cash received from customers especially because most customer payments are construction-linked but they can exceed the cash received from customers when
y

Revenues have been booked but no invoice has been raised to the customer because the company has not reached any construction milestone.

The customer has been invoiced but the builder has yet to receive payments. Such instances were rare because during FY 08, real estate investments were appreciating and customers did not have any reason to delay payments.

According to IFRS guidelines on real estate that will be adopted in India in 2011 (IFRIC 15), revenues can be recognised only when the risk and rewards of ownership have been transferred. IFRS allows the use of the percentage completion method only if one of following conditions is met:

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If the contract is a construction contract, i.e., the contract is such that buyer has complete control over the design and specification of the property until its completion.

If the contract is for rendering services, i.e., if the buyer provides the materials and the contracting entity only provides services.

If the control, risks, and rewards of ownership of the work-in-progress passes on a regular basis to the buyer (as the construction progresses).

IFRS addresses the following two key risks involved in revenue recognition with respect to the sale of real estate projects (under-construction).
y

Market Risk A fall in real estate prices below the purchase prices would result in homebuyers asking for a refund of their payment amount. Most builders allow refund after deducting a penalty. Therefore, if sales are recognised at the time of signing of sale agreement, sales will have to be reversed at the time of cancellation. For so me companies, cancellation and revenue restatements can be material. For example, for the quarter ending December 31, 2008, Indian real estate developer Lok Housing and Construction Limited announced that it would have to restate revenues of almost 50% of the past three years sales because many buyers had cancelled the corresponding sale agreements.

Execution Risk Execution risk becomes critical, especially during an economic downturn when most projects get delayed because the builders have little or no cash. For partially completed projects, recognising a portion of the total revenues may not properly reflect the execution risk inherent in these projects. Since IFRS allows revenue recognition only if the project has been delivered, an IFRS compliant companys financial statement will provide a better perspective of its execution capabilities.

Whereas IFRS would make it difficult for builders to evade the completed contract method of accounting, real estate developers may minimise the downside by restructuring their sale agreements so that they transfer the risk and reward continuously to the buyers (during the construction period). This also bodes well for homebuyers since it would make sale agreements more favourable for them than they currently are, and since they will get more control and ownership of the apartment (while it is being constructed).

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As developers in India are aware that IFRS will have an adverse impact in the initial few years as the revenue will be skewed in the year of completion, they are preparing themselves for the worst. Source: www.2indya.com Impact on Indian Informational Technology Industry: The main effect on the IT industry is that the changes in the systems and in the updating of the existing to the newer version of IFRS enabled accounting software. IFRS is an accounting-driven but it can drive major changes to IT systems as well as business processes and personnel. Experience indicates that IT costs generally constitute more than 50 percent of IFRS conversion costs. Organizations benefit when they identify and integrate the efforts of the IT team early in the IFRS conversion process. IT efforts will comprise a mix of short- and long-term projects within the organizations overall IFRS initiative. The IFRS conversion effort provides opportunities for achieving synergies with other IT projects and strategic initiatives. Impact on Indian Bank: The financial impact of convergence with IFRS (International Finance Reporting System) will be significant for banks in India, particularly in areas relating to loan loss provisioning, financial instruments and derivative accounting according to auditing and consultancy firm KPMG. IFRS is likely to impact financial performance, directly affecting capital adequacy ratios and the outcomes of valuation metrics that analysts use to measure and evaluate performance. In banking companies, financial reporting policies for provision for loan losses and investments are specified by the RBI. Repercussions of IFRS on Banking financial performance
y

Adoption of IFRS requires a significant change to such existing policies and could have a material impact on the financial statements of financial companies

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In addition to the financial accounting impact, the convergence process is likely to entail several changes to the financial reporting systems (including IT systems) and processes adopted by banks.

By virtue of operating in a regulated industry, Banking companies are subject to regulatory reviews and inspections and are also subject to minimum capital requirements.

Application of IFRS may result in higher loan losses and impairment charges, thereby impacting available capital and capital adequacy ratios.

Impact on SME: In India SMEs contribution to GDP is presently 17% which is likely to go up to 22% by 2012. Further SMEs in India contribute to 45% of industrial output, 40% of exports, employs over 42 million workers and is estimated to create one million jobs every year. Despite such laudable contribution SME sector does not get required financial support from concerned Government departments, Banking sector, financial institutions and corporate sector. SME sector is neglected by private banks and finan cial institutions, while public sector banks meet mandatory lending requirements. One of the reasons for this state of affairs is SMEs bring-out financial statements that are useful only for owner-managers / tax authorities / government authorities. Financial statements thus produced are not comparable nor carry enough credibility. Users of the financial statements of SME do not have to meet needs of public capital markets but, rather are more focused on assessing shorter-term cash flows, liquidity and solvency. IFRS for SMEs provide high quality and internationally respected set of accounting standards. IFRS for SMEs will provide a platform for growing business that is preparing to enter capital markets where application of full IFRS is required. IFRS for SMEs are meant to meet financial reporting needs of entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users. External users include owners who are not involved in managing the entity, existing and potential creditors, and credit rating agencies. IFRS for SME permits financial reporting information which helps capital providers makes better decisions resulting in a more efficient functioning of capital markets and a lower cost

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of capital for the economy as a whole; Entities enjoy improved access of capital at lower costs. The requirements of IFRS for SMEs are almost similar to generally accepted accounting practices. The article discusses basic critical requirements that can be complied with (to enable an SME to state its accounts are compliant with IFRS for SMEs) by most of SMEs at a very minimum cost and reap very high benefits. In general to state financial statements comply with IFRS for SMEs is not difficult. Most of the requirements are already being complied with while preparing financial statements for income tax purposes and other general purposes. A little more fine tuning of presentation and disclosure would enable an SME to state it complies with IFRS for SMEs thus increasing the credibility manifold. This would open many doors for SMEs including for Accessing finances, Joint ventures and collaborations. IASB has published excellent training material for IFRS for SMEs which can be accessed by everyone. A recent survey among the small and mid-size private companies revealed that
y

More than half of them believe that there should be a separate accounting standards for SMEs

Less than half of them (43%) are not even aware of the IASB issuance of IFRS for SMEs, indicating the need for more education

In India there is a need of change in several laws and regulation governing financial accounting and reporting in order to fully convergence of SMEs with IFRS. In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which financial information is reported or presented in financial statements. For instance, the Companies Act, 1956 determines the classification and accounting treatment for redeemable preference shares as equity instruments of a company, whereas these may be considered to be a financial liability under the IFRS for SMEs. There is shortage of professional with practical IFRS conversion experience in India. Therefore many companies will have no option but to rely on to external advisers and their auditors. There is an urgent need to address these challenges and work towards full adoption of IFRS and IFRS for SMEs in India in particular.
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REVIEW: The above analysis shows how adoption and convergence of IFRS has its own challenges for an individual, company and the economy as a whole. Its also a risky process so the professionals need to get proper training to fruitfully execute the entire process. I have also discussed about the impact of IFRS convergence on different sectors of our country.

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OB ECTIVE 4: To know the different standards in both IAS and IFRS.

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TABLE 6 However, currently there are no corresponding Standards available under Indian GAAP for the following IAS/IFRS: IAS 26- Accounting and Reporting by retirement Benefit Plans IAS 29- Financial Reporting in Hyperinflationary Economies IAS 40-Investment Property IAS 41- Agriculture IFRS 1- First Time Adoption of International Financial Reporting Standards IFRS 2- Share Based Payment IFRS 4- Insurance Contracts IFRS 6- Exploration for and Evaluation of Mineral Resources

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Comparative statements of International Financial Reporting Standards and Indian Accounting Standards: I. Indian Accounting Standards already issued by the Institute of Chartered Accountants of India (ICAI) corresponding to the International Financial Reporting Standards.

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II. International Financial Reporting Standards not considered rele ant for issuance of Accounting Standards by the ICAI for the reasons indicated.

III. Accounting Standards presently under preparation corresponding to the International Financial Reporting Standards

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Table 7

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OBJECTIVE 5: To give suggestions towards successful implementation of IFRS SUCCESSFUL IMPLEMENTATION OF IFRS IN INDIA Looking at the risks we cannot escape or avoid from converging or accepting IFRS. There is a strong case for convergence and harmonizing accounting principles and standards at the international level. This goes more strongly with India as we have witnessed a good growth with globalization and it has helped Indian companies to raise funds from offshore capital market. Therefore it is said that India should go along and face the challenges, study the likely risks and accordingly get prepared for IFRS. Some suggestions for successful implementation of IFRS are:
y

If India does not have an active role in standard setting process internationally,

converging to IFRS using an endorsement process and possibly accepting temporary carve outs and quirks seems to be a safer route to take. In view of various challenges and difficulties it seems to be more appropriate to adopt all IFRSs from a specified future date as it is. This method has been successfully adopted by many countries. ICAI has also decided to adopt IFRS for public interest entities from accounting periods commencing on or after april1 2011.
y Tax authorities should consider IFRS implications on direct and indirect taxes and

provide appropriate guidance from a tax perspective. The Institute of Chartered Accountants of India should make an all out effort to train and upgrade the profession in IFRS.
y Successful implementation of IFRS would require companies to fully use IFRS as

their basis of daily primary financial reporting as well as for performance tracking in the form of budgets, forecast and management accounts. IFRS requires industry specialization. But due to lack of industry specific guidance in IFRS and general reliance on Indian GAAP there are no industry specific themes in IFRS. Implementation in other countries has not revealed any visible pattern in industry wise adoption of these standards. There is need to improve upon the disclosures which may help to view financial statements not only from compliance perspective but also as a way of communicating and explaining performance.
y It should be made compulsory for the companies to prepare IFRS compliant

statements along with Indian GAAP compliant statements so that the likely problems can be traced in advance and corrected as far as possible.

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Thus to implement IFRS successfully and smoothly, a high degree of mutual international understanding about corporate objectives, financial reporting objectives and harmonization objectives need to be achieved.

Suggestions for increased convergence

The researchers put forward certain suggestions to enable harmonization in published company annual reports at the international level 1. Political pressure on International Accounting Standards Board (IASB) should be avoided from various interest groups like private sector and government agencies. 2. IASB should publicize standards developed by it and get support from the accounting profession, member countries and corporate management all over the world. 3. IASB should encourage member bodies to adopt IFRS and formulate and reformulate their rules that they are in line with IFRS 4. Legislation should be passed to the effect that in case of any changes or amendments in IASB, the local standards, if any, should be brought in line with these. 5. Local stock exchange can be used for cooperating in taking action against companies that fail to comply with the IFRS. 6. Governing bodies of the various accounting profession can also be used to apply disciplinary procedures in case of non-convergence with IFRS. REVIEW: The suggestions for successful implementation of IFRS has been given keeping in mind the company, industry and the countrys needs as a whole. The IFRS implementation is a strategic decision for every company so it should be done by the consent and cooperation of highly qualified professionals who have got proper knowledge on the implementation of IFRS.

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FINDINGS

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FINDINGS
After a thorough study on the topic, following were the findings:
y

Convergence with IFRS makes accounting information more reliable, relevant, timely and comparable across different legal frameworks.

It would be prepared using a common set of accounting standards thus facilitating those who want to invest outside India.

It would also develop better understanding of financial statements globally and also develops increased confidence among the interested parties.

It would simplify the process of preparing the individual and group financial statements for the companies thus reducing cost and time.

It would also raise the reputation and relationship of the Indian Corporate World with the international financial community like the SEC, NYSE, NASDAQ etc.

Adopting IFRS would also help the Indian Companies in improving their risk rating thereby making them more competitive globally.

It would also benefit the industrial and capital markets in the country thereby helping in the growth of the economy.

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CONCLUSION

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CONCLUSION
The vision of achieving a single language of financial reporting across the world is going to materialise gradually by the convergence and adoption of IFRS by every company across the globe. It has been believed that the need of IFRS is widely accepted in the present scenario of Liberalization, Privatization and Globalization (LPG) era. International Financial Reporting Standards remove some of the subjectivity from financial reporting and provide a consistent basis for recognition, measurement, presentation and disclosure of transactions and events in financial statements. Looking at the present scenario of the world economy and the position of India, convergence with IFRSs are strongly recommended. But this transition to IFRS will not be a swift and painless process because implementing IFRS would require change in formats of accounts, change in different accounting policies and more extensive disclosure requirements. Therefore all parties concerned with financial reporting need to share the responsibility of international harmonization and convergence. All accountants whether practicing or non-practicing have to participate and contribute effectively to the convergence process keeping in mind the fact that IFRS is more a principle based approach with limited implementation and application guidance and moves away from prescribing specific accounting treatment. This would lead to subsequent revisions from time to time arising from its global implementation and would help in formulation of future international accounting standards. A continuous research is also needed to harmonize and converge with the international standards and this in fact can be achieved only through mutual international understanding both of corporate objectives and rankings attached to it. India is getting ready to implement the globally accepted IFRS from fiscal 2011 onwards. But still the country is not sure if the implementation would bring uniformity in the accounting system or not.

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RECOMMENDATIONS

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RECOMMENDATIONS
As it is now evident that, financial statements prepared as per the IFRS would give better benefits than the Indian GAAP. It would thus be recommended that Indian Companies should adopt IFRS as soon as possible. So the following recommendations should be kept into consideration during the process for a smooth endeavour.
y Ensure Top-level commitment y Create demand from other stakeholders y Implementation in exactness y Legalization of IFRS y Proper and timely training on IFRS y Regulation of the auditing of the financial statements

Convergence to IFRS will greatly enhance the transparency of Indian companies which will surely help them to project themselves in global map, which will help Indian companies benchmark their performance with global counterparts. But companies will need to be proactive to build awareness and consensus 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. However, the responsibility for enforcement and providing guidance on implementation vests with local government and accounting and regulatory bodies, such as the ICAI in India will play a vital role. The ICAI will have to make adequate investments and build infrastructure for awareness and training program. Successful implementation of IFRS in India depends on the regulators immediate intention to convert to IFRS and make appropriate regulatory amendments.

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REFERENCES

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REFERENCES
Reports & Articles:
y y y y

Reports of Institute of Chartered Accountant of India (ICAI) Reports of International Accounting Standard Board, IFRIC,SIC Economics Times, Business Standard, Financial Express Reports from Price Water Cooper, Ernst and Young, KPMG and Deloitte.

Web support:
y y y y y y y

www.iasb.org www.sebi.gov..in www.bseindia.com www.nseindia.com www.mca.gov.in http://ifrs.icai.org/ www.icai.org

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