Concept paper convergence with IFRSs in India

Last updated: 21 October 2007

Convergence with International Accounting Standards (IASs)/International Financial
Reporting Standards (IFRSs) (collectively referred to as IFRSs), issued by the International
Accounting Standards Board (IASB) has gained momentum in recent years all over the
World. More than 100 countries currently require or permit the use of or have a policy of
convergence with IFRSs. Certain other countries have announced their intention to adopt
IFRSs from a future date, e.g., Canada from the year 2011, and China from the year 2008.
Financial Accounting Standards Board (FASB) of USA and IASB are also working towards
the convergence of the US GAAPs and the IFRSs. The Securities & Exchange Commission
(SEC) has mooted a proposal to permit filing of IFRS-compliant financial statements without
requiring presentation of a reconciliation statement between US GAAPs and IFRSs in near
future. In this scenario, India being an important emerging economy in the World, is yet to
adopt the IFRSs. Internationally, insofar as cross-border investments are concerned, a non-
IFRSs compliant country is perceived as an additional risk factor. Within India also, in recent
times, the issue of convergence with IFRSs has been raised time and again at various forums.
Recognising the above scenario, the Council of the Institute of Chartered Accountants of
India (ICAI), at its 259th meeting, held on May 2-4, 2006, expressed the view that the IFRSs
may be adopted in toto at least for listed and large entities, also keeping in view the
expected advantages such as saving in cost of capital for Indian entities raising capital
abroad, saving in cost for such entities for not preparing separate set of financial statements,
expected improvement in the image of Indian industry and the accounting profession in the
eyes of the world, and increasing opportunities for Indian professionals abroad. In this
context, the Council also noted that in respect of the recently issued Accounting Standards,
there are hardly any divergence from the corresponding IFRSs and, accordingly, India is
already progressing on the path of full convergence with IFRSs. To consider various issues
involved in detail, the Council referred the matter to the Accounting Standards Board.
The Accounting Standards Board (ASB), at its 127th meeting, held on August 11, 2006,
considered the matter and supported the Council’s view that there would be several
advantages of converging with IFRSs. The Board was, however, of the view that there were
various implications of converging with IFRSs and that certain issues were required to be
addressed such as the conflicting legal and regulatory requirements related to financial
statements, the technical preparedness of industry and accounting professionals, economic
environment prevailing in the country, etc. The Board was also of the view that
convergence with IFRSs would be an important policy decision as it would significantly
affect not only the status of accounting discipline in the country but would also affect its
economy. The Board was, therefore, of the view that before taking any decision on the
matter, it would be useful to develop a Concept Paper which could be discussed with
various interest-groups involved including the government, the National Advisory Committee on Accounting Standards, regulators, and industry associations. The Board,
accordingly, decided to constitute a Task Force to prepare the Concept Paper on
Convergence with IFRSs with the objective of exploring:
(i) the approach for achieving convergence with IFRSs, and
(ii) laying down a road map for achieving convergence with IFRSs with a view to make
India IFRS-compliant.

For futher details :

http://icai.org/icairoot/announcements/announ1186.pdf

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Concept paper convergence with IFRSs in India

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