Convergence with IFRS

By Simrat Jeet Singh

The Ministry of Corporate Affairs has notified the much awaited Companies Indian Accounting Standards Rules, 2015 on 16th February, 2015. The notification of these IFRS converged standards fills up significant gaps that exist in the current accounting guidance, and India can now claim to have financial reporting standards that are contemporary and virtually at par with the leading global standards. This will in turn improve India’s place in global rankings on corporate governance and transparency in financial reporting.

International Financial Accounting Standards (IFRS), formerly known as International Accounting Standards (IAS) are the Standards, Interpretations and Framework for the Preparation and Presentation of Financial statements adopted by the International Accounting Standards Board (IASB).

They comprise:

  1. International Financial Reporting Standard (IFRS)
  2. International Accounting Standards (IAS)
  3. Interpretation developed by the International Financial Reporting Interpretation Committee (IFRIC) or the former Standing Interpretation Committee (SIC).

Accounting bodies all over the world and the various accounting standard setting bodies are looking to eliminate the differences persisting in various countries as to the treatment in the accounts in respect of assets, liabilities, Income & expenses etc. The main purpose is to create a condition in which the financial statements of any entity can be easily read and understood by the various users of the statement residing in different parts of the world. IFRSs are the solutions to this problem.

Single set of accounting standards would enable internationally to standardize 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. For investors, it gives a better understanding to the financial statements and assess the investment opportunities other than Home Country. It also benefits the accounting professionals in a way that they will be able to sell their services in different parts of world

The Companies (Indian Accounting Standards) Rules, 2015 lay down a roadmap for companies other than insurance companies, banking companies and non-banking finance companies (NBFC) for implementation of Ind AS converged with IFRS.


Companies whose securities are listed or in the process of listing on the Small and Medium Enterprises (SME)exchanges will not be required to apply Ind AS and can continue to comply with the existing accounting standards unless they choose otherwise.


  • By adopting IFRS, India Inc. would be adopting a “global financial reporting” basis that will enable your company to be understood in a global marketplace. This helps in accessing world capital markets and promoting new business. It allows your company to be perceived as an international player.
  • A consistent financial reporting basis would allow a multinational company to apply common accounting standards with its subsidiaries worldwide, which would improve internal communications, quality of reporting and group decision-making.
  • In increasingly competitive markets, IFRS allows a company to benchmark itself against its peers throughout the world, and allows investors and others to compare the company’s performance with competitors globally.

IFRS convergence, but not IFRS yet!

India’s efforts towards convergence with IFRS is a giant leap forward and to make Indian standards contemporary. However, due to the existence of certain carve-outs or deviations from IFRS, these standards would not be considered as equivalent to IFRS, even though the carve-outs are relatively minor. While some of these carve-outs are optional, there are certain mandatory carve-outs, which may prevent companies from being able to state dual compliance with IFRS as per the IASB. Ability to state full compliance with IFRS would be relevant for several Indian companies that are raising funds from global investors, including from leading global capital markets.

The MCA and the ICAI have done laudable efforts towards minimizing the carve-outs as compared to those that existed in the 2011 version of the Ind-AS standards. Going forward, the MCA and the ICAI should continue to work closely with the IASB to eliminate these carve-outs in a time bound manner by either getting the IASB to change the IFRS requirements or align the Indian requirements with IFRS.

The speed of regulatory change is such that companies find it difficult to keep pace. With limits on resources, availability of talents and different reporting needs there is a tremendous stretch on companies to manage compliance and improve reporting efficiency.

Considering such a volatile environment in regulatory and reporting landscape, following areas will be topmost priority areas to manage these transformation process (a) Adopt integrated impact assessment approach (b) Move towards connected reporting framework (c) Invest in technology & talent.

Integrated impact assessment will involve assessing impact of transition to new framework (be it IND AS, Tax accounting standards or GST) on all areas of organisation like accounting and reporting, tax, systems and processes, human resources. Organisation should consider clubbing transformation projects, to the extent possible, to consolidate efforts of managing change at same time. This will result in cost saving and reduction in overall transformation efforts.

Connected reporting is an approach to develop an organization’s current reporting to bridge the gap between the different information requirements of internal and external audiences. It enables organizations to communicate their financial and nonfinancial information, using consistent data, simplified IT structures and methods, in order to reduce complexity in the reporting process. Companies can do this by integrating or upgrading IT systems, making data more consistent and widely available, investment in data analytics and optimizing processes.

Rapid changes in regulation are exposing companies to risk of impairment of their existing resources. Re-skilling of resources is becoming number one priority for all organisation. Companies will need to invest heavily into training to ensure that their people are geared up to deal with ongoing regulatory developments.

1 Comment on Convergence with IFRS

  1. very helpful article explained in so simplified mannered that it can even be understood by a layman… gud job author ji… n thank you so much

Leave a Reply to subham sinha Cancel reply

Your email address will not be published.


%d bloggers like this: