IFRS stands for International Financial Reporting Standards and are a set of accounting standards developed by International Accounting Standards Board (IASB), an independent accounting standard setting body, based in London.
Related: Detailed post on What is IFRS
IFRS in India
In 2010, MCA had set up the roadmap for implementation of IFRS in India. Below is a brief summary of the roadmap:
(chart credit: pwc)
According to this plan IFRS were to be enforced on specified companies from April 1, 2011. But this was not implemented.
ICAI has now proposed a new plan according to which IFRS will be implemented beginning with companies that have a net worth of over Rs 1,000 crore from April 1, 2015.
In the second phase, both listed and unlisted companies with a net worth of over Rs 500 crore but less than Rs 1,000 crore will have to converge with the international accounting standards from the financial year beginning April 1, 2016.
Related: IFRS course options
Convergence vs. Adoption
Indian regulatory authorities have decided to take convergence route rather then adoption of IFRS.
Adoption would mean that the MCA sets a specific timetable when publicly listed companies would be required to use IFRS as issued by the IASB. Convergence means that the ICAI will develop high quality, compatible accounting standards over time.
ICAI has already prepared Indian accounting standards (Ind AS) that converge with IFRS and are open for comment.
Advantages of Convergence
Convergence with IFRS:
- Improves investor confidence across the world with transparency and comparability
- Improves inter-unit/ inter-firm/inter-industry comparison
- Group consolidation made easy with same standard by all companies in group wherever located
- Acceptability of financial statements across all stock exchanges, which facilitates entry of any Indian company to any stock exchange across the globe
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- Comparison of Indian GAAP, IFRS and Ind AS issued by Deloitte.
- Comparison of Ind AS and IFRS issued by PWC.