Finance, Accounting and Control Case Study

International Financial Regulatory Standards: India's Need for Convergence

OR

Abstract:
With an increased trend in the globalisation of companies across international borders, there has been an urgent call to rationalise and synchronise the accounting standards that companies under different jurisdictions and countries use. The IFRS (International Financial Regulatory Standards) is a step in that direction to bring uniformity in reporting standards. Over a 100 countries have already adopted IFRS and some countries like India, Canada and China, have committed themselves to a timeline to converge to IFRS. The US too has committed to doing away with US GAAP (Generally Accepted Accounting Principles) gradually in a phased manner with the intention to converge to IFRS eventually. On one hand, the adoption of IFRS is believed to bring in transparency and enlarge the scope for companies to tap global investors, but on the other hand, the element of subjectivity in assessing and recording the transactions without any specific guidelines on the company's financial statements has raised concerns. Further the impact of the principle of fair value on which IFRS is primarily based has proved to be a major area of apprehension. The manpower and requisite skills to understand and implement IFRS are equally crucial. The case focuses on the logic behind adoption and implementation of IFRS in various countries and the challenges and opportunities associated with this convergence.

Pedagogical Objectives:

• To understand the importance of IFRS.
• To analyse the differences between US GAAP and IFRS.
• To assess the challenges and opportunities in converging to IFRS.

Keywords :  Accounting standards, Rule based accounting, Principle based accounting, Convergence, US GAAP (Generally Accepted Accounting Principles), Restructuring, IFRS (International Financial Regulatory Standards), IASB (International Accounting Standards Board), Fair value accounting, Disclosure standards, Accounting framework, Regulators, Accounting skills, Norwalk agreement, Corporate governance