Emergence of International Financial Reporting Standard in India's Accounting Scenario

Abstract

In India, the globalization of economic activity has resulted in an increased demand for high-quality, internationally comparable financial information. With the world becoming a global village, companies and investors who operate business in several countries need to understand each nation's accounting principle. There is a growing international consensus on the International Financial Reporting Standards as acceptable standards for assessment of the financial health of a company across the globe. The lack of financial statement comparability influenced business decisions in many ways. In this backdrop, this article examines rationale behind adopting IFRS in Indian Accounting scenario, the difference between IFRS and Indian GAAP and the convergence procedure to be adopted to harmonize Indian Accounting Standard with IFRS and major divergence existed between IFRS and IGAAP. The development of IFRS in India ideally will lead to the worldwide use of a single set of high-quality accounting standards for both domestic and cross-border financial reporting. The conflicting legal and regulatory requirements related to financial statements, the technical preparedness of industry and accounting professionals and the economic environment prevailing in the country will pose challenges to this convergence. Nevertheless, it can  optimistically be concluded that a common global reporting language will ensure that investors funds will be moved easily within the global market and IFRS implementation in India will enhance investors' confidence about investing in Indian economy and ultimately IFRS implementation will provide opportunity for comparatibility of financial statements prepared all over the world for cross-border investment.

Keywords: IFRS, GAAP, India, convergence, Accounting.