IFRS India Some Facts

The implementation of International Financial Reporting Standards(IFRS) has been deferred by the Government of India. 

First of all take a quick look about the IFRS.

A committee named International Accounting Standards Committee was founded in 1973 in London which developed the International Accounting Standards. Later in 2001, the International Accounting Standards Board was formed as a successor to the International Accounting Standards Committee. This Board was responsible for developing International Financial Reporting Standards(IFRS) and to promote its use and application. The IFRS are certain standards based on some principles.

The IFRS provides a global set up for preparing and disclosing of financial statements of companies. The IFRS will help large companies which have many subsidiaries in different countries in the world. A unique set of standard can be followed by these companies to report their finances. So this is a set of accounting 

standards which is to be followed globally.

The main aim or benefit of IFRS is the convergence of accounting standards. This will help the potential investors to invest at a lower cost. Different accounting standars will only make it difficult for the investors to compare the different financial results of different companies. If we follow IFRS the difficulty will be removed. So it is all about eliminating the differences between national and international standards and adopting a unique standard for financial reporting. This will be of great help for multinational companies.

Most economies are now following the historical cost accounting system. The Ministry of Finance(MoF) in India has taken a view that the companies should continue to follow the historical accounting practices for taxation purpose. Historical cost is the original monetary value of an economic item as on the date of its acquisition. It may not generally reflect the current market valuation. But the use of fair market value is the more accepted principle and IFRS is based on the same. The MoF in India thinks that there will be some play by the industries in fixing the fair value which will lead to a loss in revenues for the government.

However India had agreed to implement IFRS in three phases. Th first phase will cover 30 Sensex and 50 Nifty companies with a net over 1000 crore. But most of the countries like US and Japan are still to make IFRS mandatory. 

A unique standard for financial reporting is necessary. A good understanding by investors globally is a necessity for any company.