International Journal of Mechanical and Production

Engineering Research and Development (IJMPERD)

ISSN(P): 2249-6890; ISSN(E): 2249-8001
Vol. 10, Issue 1, Feb 2020, 885-890
© TJPRC Pvt. Ltd.

AN IMPACT ASSESSMENT OF IND AS ON FINANCIAL REPORTS: WITH SPECIAL

REFERENCE TO FINANCIAL PERFORMANCE OF HUL

DR. YASHASVI RAJPARA1 & KIRTAN P. RAVAL2

1
Assistant Professor, SEMCOM, S. P. University, V. V. Nagar, Anand, Gujarat, India
2
Research Scholar (Ph.D.), Sardar Patel University, V. V. Nagar, Anand, Gujarat, India
ABSTRACT

From the year 2015, International Financial Reporting Standards are in core focus in the whole world and matter in
focus for discussion for all business organization dealing in international business. India is one of those countries which
have adopted converged Accounting Standards since the year 2016-17. Convergence with IFRS has given global outlook
to the financial reports as well as uniform financial reporting which is becoming useful for easy joint ventures and
partnership with the MNCs. There were certain challenges but still it has given much exposure and enhancement in
financial dealing to the Indian Companies. In this research paper, researcher has tried to determine the impact of IND
AS on financial reporting of HUL as compare to the financial reporting as per Indian Generally Accepted Accounting
Principles.

Original Article
KEYWORDS: IND As, Financial Performance

Received: Dec 12, 2019; Accepted: Feb 18, 2020; Published: Feb 28, 2020; Paper Id.: IJMPERDFEB202080

INTRODUCTION

This study is conducted with the core object of determination of impact of IND AS on financial measures of the
HUL Company. From the year 2016-17 it was mandatory for the HUL to report as per IND AS because it’s
turnover was more than Rs. 500 Crores. From the year 2016-17 as per ICAI guideline and roadmap all those
companies whose turnover was more than Rs. 500 Crores were required to do financial reporting as per 39 IND AS.
Other companies have to follow step by step as per the guideline of the ICAI and MCA. Around the world many
counties whose taxation laws were not allowing to adopt IFRS in the same nature and format were gone for the
procedure of convergence and tried to establish global benchmark more or less suitable to the IFRS. India has also
merged its IGAAP with IFRS and worked accordingly. Researcher has tried to give core insights in terms impact on
financial report of one company i.e. Hindustan Unilever. HUL is one of the biggest companies in India and also
playing important role in the Indian economy so, Impact analysis on it may give fruitful results.

REVIEW OF LITERATURE

Bhatt Parth R. (2016) has conducted research on issues while convergence with IFRS in which researcher has spot
lighted areas like profitability condition, liquidity condition and operations of business of selected companies.
Researcher has utilized questionnaire for primary data collection and computed ratios for secondary data analysis.
Researcher concludes that there was no significant difference has been observed in the profitability ratios and
liquidity ratios.

www.tjprc.org SCOPUS Indexed Journal editor@tjprc.org

886 Dr. Yashasvi Rajpara & Kirtan P. Raval

CA Pallavi Gupta (2017) has done research with the support of two authors for analyzing the level of impact on
the ratios of Wipro Company of IFRS as compare to IGAAP. For which researchers have considered period of five years.
Researchers have also tried to identify main areas of IFRS which were bringing difference in the Ratios of the company.
Researchers have concluded that IFRS brings significant differences in the ratios of Wipro company as compare to the
GAAP.

Kantayya R. and Panduranga V. (2017) have carried research for the comparison of balance sheet of the two
IT companies of India for determining that how IFRS affects financial reports as per compare to the reports as per IGAAP.
Period 2006-07 to 2015-16 has been considered for the study and for analysis different tools like mean, percentages and
gray’s comparability index and t-test were used. All Assets, All Liabilities and Total equity were key areas taken into a
count. Researcher has found considerable and significant differences in all such areas.

OBJECTIVES OF THE STUDY

 To determine the impact of IND AS on Liquidity of HUL as compare to IGAAP

 To assess the impact of IND AS on Profitability of HUL as compare to IGAAP

HYPOTHESES

 H0: There is no significant difference in Current Ratio of HUL in pre and post convergence period.

 H1: There is significant difference in Current Ratio of HUL in pre and post convergence period.

 H0: There is no significant difference in Return on Capital Employed of HUL in pre and post convergence period.

 H1: There is significant difference in Return on Capital Employed of HUL in pre and post convergence period.

RESEARCH METHODOLOGY

This research is purely based on secondary data. The data utilized for the successful conduct of this research is collected
from various online and offline sources like websites, annual reports, books, articles and periodical as well as ICAI official
gazettes.

Here financial performance of HUL as per Indian GAAP of the years 2014-15 and 2015-16, is compared with the
financial performance as per IND AS of the years 2017-18 and 2018-19. Hypothesis testing is done by t-test.

For grass root level impact assessment numerous ratios are utilized by the researcher like Current Ratio, Quick
Ratio, Return on Net Worth, Return on Capital Employed and Earnings Per Share for the pre and post convergence period
of total four years.

RATIO ANALYSIS AND HYPOTHESES TESTING

Ratios measuring profitability and liquidity of the HUL Company for the period of two years before convergence with
IFRS and after Convergence with IFRS are taken into a consideration of consolidated financial statements. Hypothesis
testing is also done on the same ratios for determination of impact of IND AS.

Impact Factor (JCC): 8.8746 SCOPUS Indexed Journal NAAS Rating: 3.11
An Impact Assessment of IND as on Financial Reports: With Special Reference to Financial Performance of HUL 887

Table 1: HUL Ratios for Pre Convergence Period (As Per IGAAP)
Ratio 2014-15 2015-16 Average
Current Ratio 1.08 1.46 1.27
Quick Ratio 0.77 1.08 0.92
Return on Net Worth 108.5 62.96 85.73
Return on Capital Employed 83.49 53.56 68.52
EPS 20.17 19.1 19.63

Table 2: HUL Ratios for Post Convergence Period (As Per IND AS)
Ratio 2017-18 2018-19 Average
Current Ratio 1.31 1.37 1.34
Quick Ratio 1.03 1.08 1.05
Return on Net Worth 71.61 76.95 74.28
Return on Capital Employed 82.03 88.98 85.50
EPS 24.09 27.97 26.03

Figure 1: Chart Showing Liquidity Ratios (Average) of Pre and Convergence

Period.

Above chart is displaying the average liquidity ratios of the pre convergence period as well as post convergence
period of HUL Company. During the years before convergence with IFRS Average Current Ratio of the company was
1.27:1 while after convergence it was 1.34:1. Before convergence Average Quick Ratio was 0.92:1 while in post
convergence period average Quick Ratio was 0.55:1. It can be seen that after implementation of IND AS Current ratio is
increased as compare to before and Quick Ratio has also been grown as compare to before.

www.tjprc.org SCOPUS Indexed Journal editor@tjprc.org

888 Dr. Yashasvi Rajpara & Kirtan P. Raval

Figure 2: Chart Showing Profitability Ratios (Average) of Pre and Convergence Period.

Above chart is displaying the average profitability ratios of the pre convergence period as well as post
convergence period of HUL Company. During the years before convergence with IFRS Average Return on Net Worth of
the company was 85.73% while after convergence it was 74.28%. Return on Net Worth has been declined after
convergence. Before convergence Average Return on Capital Employed was 68.52% while in post convergence period
average Return on Capital Employed was 85.5%. After convergence Return on Capital has been increased as compare to
before. Before Convergence Average EPS was Rs. 19.63 while after convergence it was Rs. 26.03. After implementation
of IND As EPS has shown increment.

Hypotheses Testing

Table 3: Hypotheses Testing

Ratios Calculated t-value
Current Ratio 0.73
Return on Capital Employed 0.52

As per hypotheses testing by t-Test: Paired Two Sample for Means, it can be said that,

P Value > 0.05 in the case of Current Ratio as well as Return on Capital Employed so, null hypotheses are
accepted which means there are arithmetical differences in absolute ratios but those differences are not significant so, it
can be said that financial reporting done as per IND AS has not brought considerable changes in Current Ratio and Return
on Capital Employed.

CONCLUSIONS

By successful conduct of this research paper, researcher has observed that out of all ratios of profitability and liquidity
some ratios have shown increment in absolute figures and some have shown decline also. But, on the basis of hypotheses
testing it has been very clear that absolute calculated values of ratios are showing differences after implementation of IND
AS but those differences are not significant for the Current Ratio and Return on Capital Employed so, the introduction of
the IND AS has not given major or identifiable impact on the financial performance as per the views of the researcher

Impact Factor (JCC): 8.8746 SCOPUS Indexed Journal NAAS Rating: 3.11
An Impact Assessment of IND as on Financial Reports: With Special Reference to Financial Performance of HUL 889

within the scope of data and ratios considered for the study. In future research should be done with the more years and
more companies for determination of more precise results.

REFERENCES

1. Bhatt Parth R. (2016). A Study on Issues Related to Converg Ingindian Accounting Standards into International Financial
Reporting Standards. V. V. Nagar, Anand: Sardar Patel University.

2. CA Pallavi Gupta, Dr. Javid Akhtar & Barnali Chaklader (2017),“The Impact of IFRS Adoption on Financial Ratios-An
Analysis of Wipro”, Imperial Journal of Inter disciplinary Research, Vol:3/Issue:4, ISSN:2454-1362.

3. Dr. Mahendra D. Dhonde Patil, Implementation of Converged Indian Accounting Standards ,Research Front
Vol:3/Issue:2/June 2015.

4. Dr. Vidhi Bhargav & Ms. Divya Shikha (2013), “The Impact of International Financial Reporting Standards on Financial
Statements and Ratios”, The International Journal of Management, Vol.:2/Issue:2, ISSN:2277-5846.

5. Kantayya R. and Panduranga V. (2017, April-June). A Comparative Study of Balance Sheets Prepared under Indian GAAP
and. An International Journal of Management Studies, 07(02), 11.

6. Kothari C.R. Researcher Methodology, Himalaya Publication, Delhi.

7. Parmanand Barodiya and Sonalsaxena, A Study of International Accounting Standard and Indian Accounting Standard,
International Journal of Current Research and Academic Review,Vol:3/Issue:5/May 2015.

8. Rev. Dr. Daniel Fernandes, SJ (Editor), International Financial Reporting Standards/Indian Accounting Standards (IND AS)-
An Impact Seminar, Seminar Compendium, Post Graduate Department and Research Center, Banglore, ISBN-978-81-924180-
8-7.

9. The Institute of Chartered Accountants of India, Concept Paper on Convergence with IFRS in India.

WEBSITES

10. http://www.icai.org

11. http://www.ifrs.org.

12. www.moneycontrol.com

www.tjprc.org SCOPUS Indexed Journal editor@tjprc.org