BRIC nations and IFRS

The BRIC nations are among the fastest growing economies in the world, and are all
converging towards a single set of international accounting standards by adopting
IFRS. The main goal is to create transparency, comparability of financial statements
around the world, and thus facilitating the interpretation of the same, which is fast
becoming the need of the hour for them, as these countries are the ones who are
leading in industries offering flow of goods and services, and export oriented (China
being the largest exporter of manufactured goods). These countries account for
20% of worlds GDP, and thus it is important that these countries fast adopt an
international standard.
The two important questions regarding the matter are How are the BRIC nations
adopting the international standard, IFRS; and why are they doing the above in the
way they have chosen.
At present, Brazil and Russia are simply adopting the IFRS as it is, i.e. simply copied,
whereas India and China are making their own standards, and converging them with
IFRS. The fact that India and China are making their own standards, rather than
simply adopting the same, is coherent with the different political regulations
imposed in their markets and industry, and thus trying to resist a dominant and
widespread model.
Brazil has made enormous efforts in adopting the IFRS, with IFRS being fully
adopted for consolidated statements. It has made it mandatory for the SMEs to
adopt IFRS, being the first of the four nations.
Russia has also adopted the IFRS completely for the consolidated statements and
for the foreign listed companies. In all other cases, entities have to use national
GAAP. Regarding the SMEs, no final decision has been made, with discussion
continuing.
In India, the government has chosen a convergence approach, rather than a
complete adoption of the IFRS, by making their own standards on the guidelines of
IFRS. Meanwhile, the entities which have to show consolidated statements, have to
adopt IFRS for the same, and when the converged accounting standards are made,
all the entities are required to follow them.
China, similar to India, have made their own standards, which are very similar to the
IFRS, barring some points. The consolidated statements have to use IFRS from
2005, along with the companies enlisted in the EU. Whereas single nation entity
requires national GAAP to follow.
Different versions of the IFRS adopted allow the differences between the companies
in different markets, due to certain variations in the accounting standards of
different countries in which the markets are present with the entities listed.
Secondly, the national accounting standards which were previously in place in the
nations, have impacted the variations made in the current implementation of the
variant of the international standard i.e. IFRS. Only Russia has fully adopted the
international standards, with Brazil having made very slight modifications with no

major consequences, and India and China having made their own accounting
standards, with some major differences when compared to the international
standards.

These decisions made by the respective countries can be analyzed with respect to
different perspectives. From a political perspective, the governments of Brazil and
Russia have also shown strong support for IASB, the organization behind IFRS, with
their leaders showing great support for it and believing it to be helpful for their
nation. This fact is evident from the fact that the Brazilian government had signed a
Memorandum of Understanding with the IASB, regarding the principles on which the
IFRS would be adopted by the country. Likewise, the Russian government is also
very confident that the international standard is of very great value for the country,
with several important politicians expressing their support for it. It is also evident
from the fact that evidently, Russia has acquired the Russian translation copyright,
in hopes to influence the Russian speaking nations, and further their economies for
their personal interest. On the other side, India and China have always looked at the
adoption in a secluded way, which is evident from the fact that, the adoption
deadlines have been postponed many a times.
From an economic perspective, the BRICs nations have their early financial
accounting very much linked to the tax rules, and disclosures were simply meant for
internal matters. As the era of globalization progressed, and the economies of these
nations were made more open for the world, there was a sense of making the
financial accounting of the entities in accordance with the higher international
standards, not just making the financial statements for the taxes. Also, the
differences in the methods of adoption of the international standards by the BRICs
nations can also be linked to the nature of economies of the constituting countries.
Brazil and Russia, on one hand have their economies predominantly based on
export of natural resources, while India and China have based their growth on
service industry and manufacturing respectively.