The Language of Business, Accounting, communicates the financial results and health of an enterprise to

various interested parties by means of periodical financial statements. Like every language has its own sets of
grammar rules, accounting also has its own grammar know as the Accounting Standards. Accounting Standards
are certain guidelines that direct the manner of proper application of a particular accounting principle in the
preparation and presentation of the accounts of an entity. Many such standards are available throughout the
world. Each country is having its own set of accounting standards on one hand and International Accounting
Standards [as given by the International Accounting Standards Committee (IASC)] on the other and accounts
are being prepared and presented applying the standards that suits to the country economically, socially and in
legal terms. This is because business is the part of a society and it reflects the social, cultural, economic and
legal norms of the place it belongs to.

Globalization of financial markets has meant an increased focus on international standards in accounting and
has intensified efforts towards a single set of high quality, globally acceptable set of accounting standards.
Every different countries has different accounting standards and so prepares financial statements according to
different set of rules, which means numerous national set of standards, each with its own set of interpretation
about a similar transaction, which makes it difficult to compare, analyse and interpret financial statements
across nations. Also because of the growing international shareholding and trade which was particularly
important for companies that have dealings in several countries.

International Financial Reporting Standards (IFRS) was the solution to these problems. It began as an attempt to
harmonize accounting across the European Union in 2005 but the concept became popular and attractive around
the world because of the value of harmonization. International Financial Reporting Standards (IFRS), formerly
known as International Accounting Standards (IAS) are the Interpretation, Framework and Standard for the
Presentation and Preparation of Financial statements adopted by the International Accounting Standards Board
(IASB). It is a "principles based" set of standards which are drafted lucidly and are easy to understand and
apply. These can also be called the international guidelines for accounting to help understand and compare
accounts of companies across international boundaries. In 1973 and 2001 the board of the Internal Accounting
Standards Committee (IASC) issued IAS. On April 1 2001 the new IASB took over the responsibility of setting
International Accounting Standards from IASC. It has since then continued to develop standards called as the
new standards IFRS. The liberalization and the fast changing economy of our country boosted the need for
implementing IFRS in India.

International Financial Reporting Standards (IFRS) is now recognized as a common worldwide dialect for
business affairs so that company’s statements are understandable and comparable across international
boundaries. They are progressively replacing the many different national accounting standards. The rules to be
followed by accountants to maintain books of accounts which is comparable, understandable, reliable and
relevant as per the users internal or external. The objective of IFRS is to create and introduce a single set of top
quality global Accounting Standards to produce transparent, best quality information in financial reporting
statements to make the statements more comparable and more comprehensive for the concerned users to make
more appropriate decisions based on the reporting statements. This way the worldwide use of IFRS will be able
to boost the confidence of the investors throughout the world.

In India, Accounting standards are formulated by council of Institute of Chartered Accounts of India (ICAI).
The Council of the Institute of Chartered Accountants of India on July, 2007 set a target of adopting
International Financial Reporting Standards (IFRS) for all listed, public interest and large – sized entities from
accounting periods beginning on or after 1 April, 2011 which will be done in three phases. First phase will
include companies which have a net worth in excess of Rs. 10 billion. The companies covered in this phase will
prepare an Opening Balance Sheet in accordance with IFRS converged standards as of April 01, 2011 and will
follow the IFRS converged standards from this date. Second phase will include companies having net worth
more than Rs. 5 billion but less than Rs. 10 billion. These firms will prepare an opening Balance Sheet in
accordance with IFRS converged standards as of April 01, 2013 and will follow IFRS converged standards from
this date. Rest of the firms will follow the process from April 01, 2014 when these will prepare their opening
Balance Sheet as on that date. In 2007, India decided to converge with IFRS in 2007.ICAI started the process of
developing a complete set of accounting standard that are “converged with” IFRS- which will be known as
Indian AS . There is a difference between adoption and convergence to IFRS. Adoption means using IFRS as
issued by IASB. Convergence means that the Indian Accounting standard board and IASB would continue
working together to develop high quality, compatible accounting standard over time.

There is a strong case for convergence and harmonizing accounting principles and standards at the international
level. IFRS incorporates a principles-based approach to standards setting rather than the rules-based regime,
thus, proper consideration should be given to the economic substance of financial data. This goes more strongly
with India as we have witnessed a good growth with globalization and it has helped Indian companies to raise
funds from offshore capital market. Therefore, instead of adopting an escapist path India should go along and
face the challenges, study the likely risks and accordingly get prepared for IFRS.

With the economy growing and increasing integration among the global economies, Indian companies are also
raising their capital globally due to diversification, crossborder mergers, investments or divestments. Under
these circumstances, it is imperative for Indian corporate world to adopt IFRS for their financial reporting. The
Core Group of Ministry of Corporate Affairs of India (MCA) has recommended convergence to IFRS in a
phased manner from April 1, 2012. Till then, an Indian corporate having global aspirations should consider
voluntary adoption of IFRS. The convergence with IFRS standards is set to change the landscape for financial
reporting in India. Indian companies currently follow the local accounting standards known as Indian Generally
Accepted Accounting Principles (IGAAP) issued by Institute of Chartered Accountants of India (ICAI) on
behalf of MCA, Government of India.
There are also a lot of risks involved in adopting IFRS like:

 A complete set of reporting standards would have to be brought in if they adopted IFRS which would be
quite difficult for the stakeholders like Firms, Banks, Stock Exchanges, Commodity Exchanges etc as
complete awareness of these standards among these parties is a difficult task.
 As the implementation date draws closer (2011), It has been observed that India does not have enough
number of fully trained professionals to carry out this task of adoption of IFRS in India. The Training
Professional Accountants who are looked upon to ensure successful implementation of IFRS and also
the Government officials, Chief Executive Officers, Chief Information officers who are also responsible
for a smooth adoption process lack the training as India does not have facilities to train such a large
group.
 IFRS does not recognize the presence of the laws through which Accounting Practices are governed,
Companies Act 1956 and Indian Generally Accepted Accounting Principles (IGAAP) and also Acts
which provide some guidelines on preparation of Financial Statements in India such as Indian Banking
Laws & Regulations, Securities Exchange Board of India regulations, Foreign Exchange Management
Act so the Indian Lawmakers will have to make necessary amendments to ensure a smooth transition to
IFRS otherwise the Accountants will have to follow the IFRS fully with no overriding provisions from
these laws. The Indian lawmakers also face a major challenge i.e. the complete overhaul of Tax laws to
ensure that tax authorities recognize IFRS-Compliant financial statements otherwise it will duplicate the
administrative work for the Firms and also because the Indian Tax Laws do not recognise the
Accounting Standards so the adoption of IFRS would also make the tax liabilities undergo a major
change.
 Indian Corporate World, will have a tough time, which has been preparing its Financial Statements on
Historical Cost Basis to shift from Historical Cost Basis to Fair Value Accounting as IFRS uses the fair
value to measure majority items in financial statements and also because use of Fair Value Accounting
can bring a lot of volatility and subjectivity to the financial statements. Adjustments to fair value result
in gains or losses which are reflected in the Income Statements and valuation is reflected in Balance
Sheet.
 A complete set of reporting system for companies to make their Financial Statements is provided by
IFRS. The existing business reporting model of the Indian firms will have to be amended to suit the
requirements of IFRS as in India various acts and laws provide the financial reporting system but not as
comprehensive as provided by the IFRS. The amended reporting system will take care of various new
requirements of IFRS. Enough control systems have to be put in place to ensure the minimum business
disruption at the time of transition.
Economies across the globe have benefitted by adopting IFRS for financial reporting purposes. Previous Studies
have suggested various benefits of adopting IFRS, notably, Better financial information for shareholders, Better
financial information for regulators, Enhanced comparability, Improved transparency of results, Increased
ability to secure cross-border listing, Better Management of global operations and Decreased cost of capital.

 In the last decade India emerged as a strong economy on the global economy map. Indian firms are
expanding they not only are expanding but also are setting plants in other countries and are also
acquiring other firms across the globe. For this they need funds at cheaper cost which is available in
Japanese, European and American Capital Markets. Indian Companies has to report their financials as
per IFRS to meet the regulatory requirements of these markets. Thus adoption of IFRS not only helps
Indian Firms in accessing global Capital Markets for funds but also availability of funds at cheaper cost.
 Firms are using IFRS to report their financial results across the globe. The adoption of IFRS by Indian
firms will make the comparison of two easier and also for Bankers, Investors and Lenders as it is easy to
compare the two financial statements following same reporting procedure as Indian companies or any
company have to provide financial results to interested parties. Since majority of Indian Firms are
accessing European capital markets, preparation and presentation of financial statements on the basis of
IFRS helps firms in getting easy accessibility to these capital markets.
 IFRS will result in better quality of financial reporting, if adopted, due to improvement in reliability of
financial statements and consistent application of Accounting Principles of financial statements. IFRS
follows a concept of fair value which can help Indian firms to reflect their true worth of Assets held in
the financial statements among the various latest trends-based concepts. Since a single body (IASB,
London) is preparing IFRS, these are very consistent, reliable and easy to adopt ensuring better quality
of financial reporting.

IFRS can prove out to be a good choice for India if all the interested party namely the Directors Top
Management of the firms, Accountants and Regulators and Independent Auditors and Law Makers come
together and work as a team for a smooth IFRS adoption procedure. The Top Management, the governing
body of any firm should ensure that the Financial Statements are prepared in compliance with the IFRS.
Accountants and Auditors should audit and prepare Financial Statements in compliance with IFRS. Law
Makers and Regulators must implement efficient monitoring system of regulatory compliance of IFRS.
Along with this the Regulators should also ensure that proper changes are to be made in existing laws for
IFRS adoption process.