You are on page 1of 32







This is to certify that Mr. RAJ ANIL SAHU of M.Com. (Part-I) (Accountancy),


No. 18, Semester-II (2012-2013), has successfully completed the project on IFRS CONVERGENCE IN INDIA Under the guidance of DR. (PROF.) MAYURESH MULE

Sign of Co-ordinator.

Sign of principal.

Sign of Project Guide & Internal Examiner

Sign of External Examiner


I have great pleasure in presenting our project on IFRS CONVERGENCE IN INDIA I wish to dedicate this work to my lovely parents for their physical and spiritual support throughout the period I have spent on this thesis work. I wish to express my profound gratitude DR. (PROF.) MAYURESH MULE my mentor for his good advice, support and immense contributions toward this research work. I am highly indebted to our principal DR. MRS. SUDHA VYAS & our Vice Principal DR. MAYURESH MULE who took keen interest and allowed me to perform this project. I would also like to thanks our librarian who sincerely helped me getting this information.

I Mr. RAJ ANIL SAHU, student of M Com- (Part I) Roll Number 18 hereby declare that the project for the paper ADVANCE FINANCIAL ACCOUNTING, IFRS CONVERGENCE IN INDIA submitted by me for Semester-II during academic year 2012-2013, is based on actual work carried out by me under the guidance and supervision of DR. (PROF.) MAYURESH MULE

I further state that this work is original and not submitted anywhere else for any examination.

Signature of student

SR.NO. TABLE OF CONTENTS PAGE NO. 6 1 2 What is IFRS? 3 Convergence to IFRS: Meaning and Proposed Timelines 4 Entities impacted with Convergence 5 Format of IFRS for India 6 Role of ASB in Post Convergence Scenario 7 Benefits and Challenges of Convergence 8 Critical success factors for IFRS conversion projects 9 Categorization of IFRS by ICAI 10 Project Management for IFRS Convergence Project 11 Conclusion 12 Bibliography 32 31 29-30 25-29 19-25 14-18 13 13 10-13 8-10 Present Status of Indian Accounting Standard 7-8


1. Present Status of Indian Accounting Standard

Presently, the Accounting Standards Board (ASB) of the Institute of Chartered accountants of India (ICAI) formulates Accounting Standards (ASs) based on the IFRSs keeping in view the local conditions including legal and economic environment, which have recently been notified by the Central Government under the Companies Act, 1956.

Accordingly, the Ass depart from the corresponding IFRSs to maintain consistency with legal, regulatory and economic environment, and keeping in view the level of preparedness of the industry and the accounting professionals

In some cases, departures are made on account of conceptual differences with the treatments prescribed in the IFRSs.

2. What is IFRS?

IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

IFRS are generally principles-based standards and seek to avoid a rule-book mentality. Application of IFRS requires exercise of judgment by the preparer and the auditor in applying principles of accounting on the basis of the economic substance of transactions.

IFRS are issued by the International Accounting Standards Board.

The term IFRS comprises IFRS issued by IASB; IAS issued by IASC; and Interpretations issued by the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB.

International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external.

International International Financial Financial reporting reporting Standard (IFRS) Standard (IFRS)

International International Financial Financial Reporting Reporting Interpretations Interpretations Committee (IFRIC) Committee (IFRIC)


International International Accounting Accounting Standard (IAS) Standard (IAS)

Standing Standing Interpretations Interpretations Committee (SIC) Committee (SIC)

3. Convergence To IFRS
The IFRS issued by the International Accounting Standards Board (IASB) are increasingly being recognized as Global Reporting Standards. More than 100 countries such as countries of European Union, Australia, New Zealand and Russia currently require or permit the use of IFRSs in their countries. In line with the global trend, the Institute of Chartered Accountants of India (ICAI) has proposed a plan for convergence with IFRS with effect from April 1, 2011. Convergence to IFRS would mean India would join a league of more than 100 countries, which have converged with IFRS.

Why Convergence to IFRS?

A single set of accounting standards would enable internationally to standardize training and assure better quality on a global screen. It would also permit international capital to flow more freely, enabling companies to develop consistent global practices on accounting problems.

It would be beneficial to regulators too, as a complexity associated with needing to understand various reporting regimes would be reduced.

Meaning of Convergence with IFRS

Convergence means to achieve harmony with IFRSs; in precise terms convergence can be considered to design and maintain national accounting standards in a way that financial statements prepared in accordance with national accounting standards draw unreserved statement of compliance with IFRSs, i.e., when the national accounting standards will comply with all the requirements of IFRS. But convergence doesnt mean that IFRS should be adopted word by word, e.g., replacing the term true & fair for present fairly, in IAS 1, Presentation of Financial Statements. Such changes do not lead to non-convergence with IFRS. The IASB accepts in its Statement of Best Practice: Working Relationships between the IASB and other Accounting Standards-Setters that adding disclosure requirements or removing optional treatments do not create noncompliance with IFRSs. But additional disclosures or removing of optional treatment should be made clear so that users of the IFRS are aware of the changes.

IFRS Reporting In India: Proposed Timelines

Reporting under IFRS, as proposed by ICAI, would be applicable for accounting periods beginning on or after April 1, 2011. The first set of IFRS financial statements for the year ending March 31, 2012 would require preparation of: Opening balance sheet as on April 1, 2010 Comparative financial statements year ending March 31, 2011 Reporting enterprises would need to ensure preparedness for IFRS reporting as early as April 2010.

4. Which Entities will be covered under Convergence Strategy

Keeping in view the complex nature of IFRSs and the extent of differences between the existing ASs and the corresponding IFRSs and the reasons therefore, the ICAI is of the view that IFRSs should be adopted for the public interest entities from the accounting periods beginning on or after 1st April, 2011.

Public Interest

Listed Entities

Banking Entities

Insurance Companies

Large Size Entities

Which Entities are Public Interest Entities

Public Public Interest Interest Entities Entities

a)whose whoseequity equityor or a) debt debt securities are are securities listedor orare are listed inthe the process processof of in listingon on listing anystock stock any exchange, exchange, whetherin inIndia Indiaor or whether outsideIndia; India;or or outside

b)which whichis isaabank bank b) (including (including cooperative aacooperative bank), bank), financial financial institution, institution, a mutual fund,or or a mutual fund, an insurance entity; an insurance entity; or or

c)whose whoseturnover turnover c) (excludingother other (excluding income) income) exceedsrupees rupees100 100 exceeds crore crore Inthe theimmediately immediately In preceding preceding accountingyear; year; accounting

d)which whichhas haspublic public d) deposits deposits and/orborrowings borrowings and/or frombanks banksand and from financial financial institutionsin in institutions excess of excess of rupees25 25crore crore rupees at any timeduring during at any time the the immediately immediately preceding preceding accountingyear; year;or or accounting

e)which whichis isaa e) holdingor oraa holding subsidiaryof ofan an subsidiary entity entity mentioned mentioned a)to tod) d)points. points. a)

IFRS for Small and Medium Sized Entities (SMEs)

SMEs need not adopt all the IFRS as it will be too voluminous for them. A separate standard for SMEs will be formulated based on the IFRS for SMEs which is still in exposure draft stage.

The proposed standard represents a simplified set of standards for SME's with disclosure requirements reduced, methods for recognition and measurement simplified and topics not relevant to SME's eliminated. IFRS for SMEs will be adopted in to or with modifications, if necessary. Compliance with this IFRS for SMEs is not necessary to make India IFRS-compliant.

The impact of IFRS will be much larger and broader than anticipated.
Although it is widely known that IFRS is more than an accounting change, the breadth and depth of the potential IFRS impacts may surprise many executives. According to our survey, adoption will affect people, processes and technology in vital areas across the enterprise. Indeed, although executives aware of IFRS generally know the new standards represent a major change for the accounting function, those participating in our survey see it as much more than that. In fact, more than half of all respondents said that most major functions of their businessincluding IT, business operations, external stakeholders, customers and human resources (HR)will experience a significant impact from IFRS (see Figure 3). Additionally, a large majority of respondents think IFRS adoption will add complexity to other planned initiatives, including mergers, enterprise resource planning (ERP) and other IT implementations, geographic expansion and outsourcing or shared services implementations Further reflecting the significant scope of this change is the fact that executives expect IFRS adoption to require a substantial investment. More specifically, recent studies on European IFRS conversions estimate one-time conversion costs at an average of .05 percent of revenue. However, Accentures own research reveals that while an average can give some guidance on spend, companies need to more fully understand how the conversion relates to their specific circumstances. For instance, as illustrated in Figure 5, the anticipated spending on IFRS conversion among our survey sample, as a percent of revenue, varies substantially by the

size of the enterprise. In fact, as the figure shows, smaller companies

5. Format of IFRS for India

The format of IFRSs to be adopted for public interest entities should be the same as that of IFRSs, including their numbers. The numbers of the existing Accounting Standards may be given in brackets for the purpose of easier identification. Wherever required, a section may be added at the end of the adopted IFRS indicating the Indian legal and regulatory position. The IFRSs when adopted will also take into account the International Financial Reporting Interpretations issued by the IFRIC of the IASB. Only in rare circumstances of public interest a carve out from an IFRS may be made.

6. Role of ASB in Post Convergence Scenario

Endorse the IFRSs in the form of IFRS-equivalent Indian Accounting Standards for the local regulatory framework with changes such as removing optional treatments and adding disclosure requirements, where appropriate

Determine whether each IFRS meets specified criteria set out in local legislation/regu lation

Present the Indian Accounting Standards so developed for approval of National Advisory Committee on Accounting Standards (NACAS)13 for the purpose of Government notification

7. Benefits of Convergence There are many benefits of achieving convergence with IFRS. A few are discussed below:I. The Economy

As the markets expands globally the need for convergence increase. The convergence benefits the economy by increasing the growth of its international business. It also facilitates the maintenance of orderly and efficient Capital Markets and also helps to increase the Capital Formation and thereby economic growth. It encourages international investing and thereby leads to more foreign capital flows to the country. II. Investors

A strong case for convergence can be made from the view point of the investors who wish to invest outside their own country. Investors want the information that is more relevant, reliable, timely and comparable across the jurisdictions. The financial statements prepared using a common set of accounting standards helps the investors to better understand investment opportunities as opposed to financial statements prepared using a different set of national accounting principles. For better understanding of financial statements, investors have to incur more costs in terms of time and effort to convert the financial statements so that they can confidently compare opportunities. The investors confidence would also be string if accounting standards used are globally accepted. Convergence with IFRs contributes to investors understanding and confidence in high quality financial statements.

III. The Industry

A major force in the movement towards convergence has been the interest of the industry. The industry is able to raise capital from foreign markets at lower cost if it can increase confidence in the minds of the foreign investors that their financial statements comply with globally accepted accounting standards. With the diversity in accounting standards from country to country, enterprises which operate in different countries face multitude of accounting requirements prevailing in the countries. The burden of financial reporting is lessened with the 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 set of accounting standards IV. The Accounting Professionals

Convergence with IFRSs also benefits the accounting professionals in a way that they are able to sell their services as experts in different parts of the world. The thrust of the movement towards convergence has come mainly from accountants in public practice. It offers them more opportunities in any part of the world if the same accounting practices prevail throughout the world. They are able to quote IFRS to clients to give them backing for recommending certain ways of reporting. Also, for accounting professionals in the Industry as we as in practice, their mobility to work in different parts of the world increases.


V. Single Reporting
Convergence with IFRS eliminates multiple reporting such as Indian GAAP, IFRS, US GAAP

VI. Increase Comparability

IFRS will give more comparability among sectors, countries and companies. 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

VII. Access to Global Capital Markets

Convergence with IFRS will enable Indian entities to have easier access to global capital markets and eliminates barriers to cross-border listings. It encourages international investing and thereby leads to more foreign capital flows to the country.

VIII. IFRS balance sheet will be closer to economic value

Historical cost will be substituted by fair values for several balance sheet items, which will enable a corporate to know its true worth

IX. Improvement in financial reporting

Better quality of financial 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

Challenges of Convergence I. Change to regulatory environment

For the success of convergence in India, certain regulatory amendment is required. For example, The Companies Act (Schedule VI) prescribes the format for presentation of financial statements for Indian companies, whereas the presentation requirements are significantly different under IFRS. So, the companies act needs to be amended in line with IFRS.

II. Lack of Preparedness Adoption of IFRS by approximately 5000 listed companies by 2011 would result in a significant demand for IFRS resources. Corporate India and accounting professionals need to be trained for effective migration to IFRS. Additionally auditors would need to train their staff to audit under IFRS environment

III. Educating Stakeholders Educating Stakeholders comprising of investors, lenders, employees, auditors, audit committee and etc would be a big challenge as this would require a considerable time and effort

IV. Significant cost Significant one-time costs of converting to IFRS (including costs of internal personnel time, adapting IT systems, implementing revised reporting policies and processes, training personnel and educating investors, analysts and members of the board)


V. Complexity in the financial reporting process Under IFRS, companies would need to increasingly use fair value measures in the preparation of financial statements. Companies, auditors, users and regulators would need to get familiar with fair value measurement techniques

VI. Impact on financial performance Due to the significant differences between Indian GAAP and IFRS, adoption of IFRS is likely to have a significant impact on the financial position and financial performance of most Indian companies

VII. Communication of Impact of IFRS to investors Companies also need to communicate the impact of IFRS convergence to their investors to ensure they understand the shift from Indian GAAP to IFRS.

VIII. Conceptual differences For example, the Indian standard on intangibles is based on the concept that all intangible assets have a definite life, which cannot generally exceed 10 years; while IFRS acknowledge that certain intangible assets may have indefinite lives and useful lives in excess of 10 years are not unusual


8. Critical success factors for IFRS conversion projects






The International Financial Reporting Standards (IFRS) are arguably the most widely discussed accounting topic of the moment among businesses in the United States (US)in particular, what is involved in adopting the standards. The volume of discussion has only intensified since November 2008, when the US Securities & Exchange Commission (SEC) proposed a roadmap that would allow some US companies to adopt IFRS as soon as 2009 and require adoption by all companies by 2014, 2015 or 2016, depending on the companys size and filing status. According to Accenture 2008 IFRS Survey, information technology is most commonly seen as a key to the success of an IFRS initiative, fact cited by just less than 60 percent of executives surveyed. Not far behind in the minds of survey participants are trained people, cited by just under half of the respondents. And, given the scope and extent of IFRSs impact on an enterprise, it is no surprise that approximately one-third of executives view change management as a critical success factor. Having Technology in Place to Support the Conversion [57%]

Project Management



No doubt, a companys enterprise resource planning system may need to be modified to handle differences in the way some accounting measurements for example, asset retirement obligations are calculated under IFRS. The same goes for processing logic. For example, unlike Canadian and U.S. GAAP, IFRS allows an asset previously written down for impairments to be written back up if its fair value recovers. Processing logic that takes that possibility into account would need to be built into systems. There may also be a need for changes to the interface between the general-ledger system and any other system that relies on data from the ledger, such as for internal-management reporting or compliance. Having Trained People in Place [49%] As is the case with any large-scale change initiative, a comprehensive communication program should accompany the IFRS conversion to inform key stakeholders of what IFRS means for them (and, in the case of employees, how specific elements of their jobs will be affected by conversion). For investors and analysts, communication should focus on how IFRS will affect earnings, as well as the companys assets and liabilities. Employees and business unit leaders also will need to be alerted to what is changing and when, and how those changes will affect their daily jobs (and, as noted earlier, in some cases their compensation). How are companies faring in these areas? Organizations in Accenture survey are proceeding down the path to addressing these key IFRS success factors, although considerable opportunity for improvement exists. For example, about 40 percent of respondents claimed their companies have a high level of skills and capacity to address IFRS conversion impacts on a variety of areas, including tax planning and strategy, capital/ investment planning and strategy, internal and external reporting, mergers and

acquisitions (M&A) planning and strategy, and ERP and financial systems. But only approximately one-third gave a high rating to their ability to address IFRS impacts on such areas as investor relations, incentive compensation changes and debt covenant revisions. One-third of respondents also said they very much so have an adequate number of personnel with sufficient skills and capacity for converting to and maintaining IFRS financial statements; just less than half said they somewhat have such skills. However, 20 percent said they either have no such skills in place or dont know the state of their capabilities in this area. And when it comes to change management and communications, just less than half said they expect to have a moderate focus on these areas, while only 37 percent said their focus on such factors will be significant. In sum, it appears that for a substantial portion of companies surveyed, the talent and attention focused on IFRS adoption are not as strong as they could be given the magnitude of the initiative they face. Having a Good Change Management Plan [31%] Accentures experience in IFRS conversions has revealed additional and related insights into the factors for success. For example: They have learned that it is critical to get started early, which the large companies in our survey are in fact doing. And the scale, scope and complexity of the initiative can be significant, so it behooves companies to take advantage of the time they have to tackle the challenge.


Second, they found that a strategic assessment is invaluable for defining how adoption will impact each specific organization, and in particular how the chosen IFRS policies will affect people, processes, data and technology.

Conducting such an assessment will enable companies to have a more effective timeline for preparation and implementation, and will allow them to understand potential synergies with other company initiatives. Here are some examples: A company designing and implementing an ERP system should consider how their chart of accounts and general ledger design and configuration would have to change to accommodate the parallel accounting required by IFRS. Doing so would allow them to embed those changes in the new system while it is being developed, instead of having to implement costly changes down the road when the conversion to IFRS is made. Another example relates to training: companies generally understand that the finance function will have to undergo extensive training to make the shift to IFRS. However, as mentioned earlier, IFRS likely will affect many other areas of the business, and therefore training for employees in functions outside of finance also must be developed and implemented to make the transition to IFRS as smooth as possible. Given the fact that IFRS could touch many areas of the business, it is also critical to have representatives from across the enterprise involved in the initiative. One way to secure such participation is by creating a cross-functional steering committeeaccountable to the audit committeethat includes individuals from human resources, information technology, business operations and finance. Sufficient Funding [19%]

In its proposed plan to move all U.S. publicly traded companies to the global standards, the SEC also predicted that the largest U.S. registrants that adopt IFRS early would incur about $32 million in additional costs for their first IFRS-prepared annual reports. The most widely used metric for the expenses incurred in Europe came from the Institute of Chartered Accountants in England and Wales back in 2005, after European Union companies switched from their home-country GAAPs to IFRS. Those with revenue between 500 million Euros and 5 billion Euros spent 0.05 percent of their revenue in their first year of transitioning to IFRS. Smaller companies likely will have a disproportionately higher cost to begin the conversion process, if regulators mandate that they, as well as their larger counterparts, move to IFRS. Companies with revenue between $1 billion and $4.9 billion the lowest category in the Accenture survey predict they would spend 0.731 percent of their revenue on the change. Compare that to the companies with revenue over $50 billion that expect to spend only 0.103% of their revenue. Executive and Board Support [19%] When it comes to both the impacts and opportunities inherent in adopting IFRS, Accenture research shows that CFOs take a very different view than other executives. Indeed, while all respondents acknowledged the complexity of IFRS, CFOs see the task as more challenging, are more optimistic about its results and are more prepared to act fast. For example, more than two-thirds of CFOs predicted IFRS conversions would add significant complexity to executing other enterprise initiatives, versus less than half of other respondents. Across the board, CFOs also are more likely than other respondents to believe IFRS adoption


will have a significant impact on all functions: a minimum of 60 percent of CFOs voiced this sentiment, compared with a range of 21 percent to 47 percent for other respondents. This difference likely explains why CFOs also are more apt than others to recognize the importance of change management. In fact, 64 percent of CFOs, versus only 30 percent of other respondents, plan to emphasize change management and communication as part of their IFRS initiative. Finally, CFOs appear much more ready to act. While 15 percent of directors of finance and accounting are waiting for more clarity and direction before beginning their IFRS projects, less than 5 percent of CFOs believe they need more insight to proceed. To make an enterprise become successful in IFRS conversion, it needs more than an adaptable executives, it needs a full supporting executives. Professional Support with IFRS Experience [12%] Just as today not everyone within a companys controllership and accounting functions is knowledgeable about U.S. GAAP literature in its entirety, the same will be the case with IFRS conversion training. All such personnel should get awareness-level training to paint the big picture. But deeper training should be given only on accounting issues that people specifically deal with in their roles. For example, someone who works on pensions and employee benefits will need a lot of instruction in how IFRS treats that, but wont necessarily need to know much about inventory accounting. And for those all, an IFRS adopter need professional support with IFRS Experience. Having in-house accountants who establishes a position as the go-to person on IFRS within a company, will give a good impact in the transition. The footnotes to financial statements are

going to be much more important than with U.S. generally accepted accounting principles, because they will allow more flexibility in what and how information is presented. Its going to be a different kind of expert than youve had under GAAP, and that person is going to be extremely needed because they will help the company understand what its real options are.

9. Categorization of IFRS by ICAI

ICAI has categorize the IFRS in five categories based on the extent of changes or the extent of support required from the regulatory authorities:

Categories of IFRS

Category I

Category II

Category III

Category IV

Category V

Category I A

Category I B

Category III A

Category III B


Category I IFRS Category I A

IFRSs which do not have any differences with the corresponding Indian Accounting Standards IAS 11, Construction Contracts IAS 23, Borrowing Costs

Category I B
IFRS which has certain minor differences with the corresponding Indian Accounting Standards IAS 2 Inventories IAS 7,Cash Flow Statements IAS 20, 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 IFRS
Category II: IFRSs which 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 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 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) (Corresponding Indian Accounting Standard is under

Category III IFRS Category III A

IFRSs having conceptual differences with the corresponding Indian Accounting Standards that should be taken up with the IASB 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 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. 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) 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 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. IAS 29, Financial Reporting in Hyper-inflationary Economies

Which way of Adoption of IFRS is preferred: stage wise on the basis of category of IFRS or all at once from a specified future date
The ICAI examined whether a stage-wise approach to convergence should be followed whereby certain IFRS are adopted immediately (Category I) and certain other IFRS are adopted within a short period of time, say two years (Category II and III) and the balance standards are adopted only when the laws and regulation are changed. However, the ICAI concluded that such a stage-wise approach may result in several application complexities because many accounting standards are inter-related. So, considering the challenges to transition, the ICAI has opted for an approach whereby all IFRS should be adopted for the defined entities for accounting periods commencing on or after April 1, 2011. The ICAI believes that this transition period till April 1, 2011 will enable all participants in the financial reporting process to help in building the environment supporting the adoption of IFRS.

10. Project Management for IFRS Convergence Project

Complex tasks are easier when divided into manageable pieces and it is true for IFRS convergence project also. Project can be broken down into three key phases.

1. Assess
Identify the key dates and the date of transition to IFRS Develop an IFRS training plan for accounting and finance personnel. Identify differences in the relevant accounting policies.


Identify gaps in systems and processes to gather information needed under IFRS and the currently available information.

2. Design
Redevelop reporting manual i.e., develop IFRS accounting manual modifying chart of accounts and containing detailed instructions. Measure the impact of the differences identified on the latest financial prepared under Indian GAAP. Apply latest version of IFRS consistently Apply IFRS 1 which deals with first-time adoption of IFRS. Identify permitted exemptions from specified IFRS as per IFRS 1.

3. Implement
Prepare an opening IFRS balance sheet at the date of transition to IFRS Explain the impact of transition from previous GAAP to IFRS as required by IFRS 1 Apply IFRS as business as usual.


Benefits derived from convergence are lot but also the challenges. The success of the convergence to IFRS in India will depend on cooperation from government, regulators and tax departments. Ultimately, it is imperative for Indian entities to improve their preparedness for IFRS adoption and get the conversion process right. Given the current market conditions, any restatement of results due to errors in the conversion process would be detrimental to the company involved and would severely damage investor confidence in the financial system. The transition to IFRS is likely to be challenging for corporate India. However, if the transitioned is planned and managed successfully, it will generally be positive for financial reporting in India. This will improve the quality and transparency of the financial reporting process and further align corporate India to the global economy and the global capital markets. There is an urgent need to address these challenges and work towards full adoption of IFRS in India. The most significant need is to build adequate IFRS skills and an expansive knowledge base amongst Indian accounting professionals to manage the conversion projects for Indian entities . This can be done by leveraging the knowledge and experience

gained from IFRS conversion in other countries and incorporating IFRS into the curriculum for professional accounting courses.


Economic Times Times of India