Ifrs And Indian Business Environment

Indian corporates are likely to reap significant benefits from adopting IFRS.

* Improvement in comparability of financial information and financial performance with global peers and industry

standards. 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;

* The adoption of IFRS is expected to result in 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; and

* Better access to and reduction in the cost of capital raised from global capital markets since IFRS are now

accepted as a financial reporting framework for companies seeking to raise funds from most capital markets across

the globe. In addition to the above, there are several impediments and practical challenges to adoption of and full

compliance with IFRS in India.

* The need for a change in several laws and regulations governing financial accounting and reporting in India.

In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which

financial information is reported or presented in financial statements.

* There is a lack of adequate professionals with practical IFRS conversion experience and therefore many

companies will have to rely on external advisers and their auditors. This is magnified by a lack of preparedness

amongst Indian corporates as this project may be viewed simply as a project management or an accounting issue which

can be left to the finance function and auditors .

* Another potential pitfall is viewing IFRS accounting rules as similar to Generally Accepted Accounting

Principles in India (Indian GAAP), since Indian accounting standards have been formulated on the basis of principles

in IFRS However, this view disregards significant differences between Indian GAAP and IFRS as well as differences in

practical implementation and interpretation of similar standards.

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.

by: Sundar Rawat

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