1. IFRS - A GLOBAL ACCOUNTING
LANGUAGE
he movement of world economies and their
expansion of corporate overseas with dramatic
financial results brought forward the need for a
single set of global accounting standards that
could be used for domestic and cross border financial reporting
of multinational companies. International Financial Reporting
Standards (IFRS) are a set of accounting standards developed
by the International Accounting Standards Board (IASB) that
is becoming the global accounting standard for the preparation
of public company financial statements. The trend towards
IFRS has evolved around a widespread agreement to
synchronize accounting standards internationally. It is a
Principle Based approach, which is in contrast to GAAP, a
rules-based accounting standard.
As rightly quoted by Plato,
“Necessity is the mother of Invention”
Whilst the impact of globalization and harmonization is currently being witnessed around
the globe, the use of different accounting frameworks in different countries created confusion for
users of financial statements. This confusion lead to inefficiency in capital markets across the
world. Therefore, increasing complexity of business transactions and globalization of capital
markets called for a single set of high quality accounting standards that underpins the trust
investors place in financial and non-financial information, which embrace the adoption of
International Financial Reporting Standards (IFRSs).
Aims:
 To develop global accounting standards requiring transparency, comparability and high
quality in financial statements.
 To encourage global accounting standards.
 When implementing global accounting standards, to take into account the needs of
emerging markets.
 Converge various national accounting standards with the global accounting standards.
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2. Harmonization, Convergence and Adoption of IFRS: The Clarification
The Term Harmonization means “the reconciliation of different accounting and financial
reporting systems by fitting them into common broad classifications, so that form becomes
standard while content retains significant differences.”
There are two approaches to IFRS adoption around the world: Convergence/Adoption approach
 Convergence means “the process of converging or bringing together international
standards issued by the IASB and existing standards issued by national standard
setters, with the aim of eliminating alternatives in accounting for economic
transactions and events.”
 Adoption means “full scale implementation or usage of IFRS without any variation.”
GLOBAL SCENARIO:
IASB expressed as “Adopting a set of standards like IFRS can be more appealing to a country if
other countries have adopted it as well (in this sense, IFRS can be a product with “network
effects”). In other words, countries do not adopt IFRS all at once, and the observed inter-
temporal increase in IFRS adoption across countries can be due to the growing value of the IFRS
network. ”
Statistics cited below adds strength to such expression by IASB,
The use of IFRS as a universal financial reporting language is gaining momentum across the
globe. Several countries have implemented IFRS and converged their national GAAP to IFRS.
Certain jurisdictions have been much quicker in their embrace, adoption and adaptation of IFRS,
than others, as well as highlighting the need for the adoption of International Financial Reporting
Standards. More than 120 countries throughout the world, including the 27 European Union
member states, Australia, New Zealand and Russia currently require or permit the use of
International Financial Reporting Standards (IFRS) developed by the IASB. Japan plans to
introduce IFRS by 2016.
INDIAN SCENARIO:
The Institute of Chartered Accountants of India (ICAI) had recommended the roadmap to the
Ministry of Corporate Affairs (MCA) in August 2014, subsequent to the Budget statement of the
Hon’ble Finance Minister to implement the Indian Accounting Standards converged with
International Financial Reporting Standards (IFRS) on voluntary basis from 1st April, 2015 and
on mandatory basis from 1st April, 2016.

3. Benefits:
The net economic value of IFRS is intended to capture direct pecuniary benefits as they are
usually conceived in economic models of networks,
- Approach of standards in IFRS is ‘Principle Based’ rather than ‘Rules-Based’ as in case
of GAAP, as a result of this fundamental difference, it allows management to use greater
discretion and flexibility when preparing a company's financials.
- Upon implementation of IFRS, users will have the ability to compare the performance of
all companies regardless of their country of operation.
- IFRS is seen as more than just a way to provide a global accounting standard - it is also
an opportunity to look into the quality and integrity of management through judgments
made when reporting financial results.
- It not only subsequently improves the quality of financial reporting but also improves the
comparability of financial reporting within and foreign countries.
- Reduce costs for multi-national corporations particularly as capital flows and trade
become more globalized.
- Increases willingness on the part investors to make valid comparisons between
companies across the world.
- Cheaper for capital market participants to become familiar with one set of global
standards than with several local standards.
- More Efficient allocation of resources by investing across borders.
Challenges before countries in implementation of IFRS:
Inspite of several benefits as may be looked out by the different people, there will be several
challenges that will be faced by the way of IFRS implementation,
- Lack of training facilities and academic course on IFRS will also pose Challenges. It
would be a challenge to bring about awareness of IFRS and its impact among the users of
financial statement
- The benefits from adopting IFRS, however, are likely to diminish with the relative
quality of local governance institutions, including the quality of local GAAP (high
quality institutions present higher opportunity and switching costs to adopting IFRS)

4. - Implementation of IFRS means that the entire set of financial statements will be required
to undergo a drastic change. The differences are wide and very deep routed
- If IFRS standard setting can be influenced by political lobbying, more powerful countries
are more likely to be able to shape IFRS.
- IFRS convergence would affect most of the items in the financial statements and
consequently the tax liability would also undergo a change, thus the taxation laws should
address the treatment of tax liabilities arising on convergence from GAAP to IFRS
- Currently, the reporting requirements are governed by various regulators and their
provisions override other laws. The regulatory and legal requirements will pose a
challenges unless the same.
- Companies would have to ensure that the existing business reporting model is amended
to suit the reporting requirements of IFRS. The information system should be designed to
capture new requirements related to fixed assets, segment disclosures, related party
transactions etc.
Speaker’s Opinion:
Be it is the U.S GAAP or an Indian GAAP each have its own positives where their respective
jurisdictions are concerned!
As Cited above, when it comes to a scenario of an MNC the jurisdiction gets widened which
does not provide the precise depiction of the financial position to the investors who are
widespread across the globe, IFRS implies not only for financial statement preparers and users,
but also for the entire financial reporting institutional infrastructure as well as the level of
accounting harmonization across the globe.
As implementation of IFRS is like a two sided Coin which has its own PROS and CONS.
countries that are in the process of adoption or convergence of IFRS have left with them a few
challenges that can be overcome by making certain changes consistent with their business
cultures and also serves the very purpose of this single accounting system introduction!!!!!
"What do you think of the current attempts to create a single set of
global accounting standards? Should they be pursued – or not?"
Their responses reflected a wide range of opinion, and represent the
opinions on nearly every side of the debate…