Analysis of Convergence Process towards International Financial Reporting Standards in India: A Case Study of Selected Indian Companies

Financial Reporting and the art of financial reporting are as important as the business itself. With the process of globalization there is a change in the way business is being carried out. Companies are nowadays crossing borders in search of business and capital and getting themselves registered in the stock exchanges of the other nations in order to attract investors. These companies are required to prepared their financial statements in the method of financial reporting which is being followed in that particular country. As in spite of the efforts of the IASB each country follows a different methodology for financial reporting therefore converting a set of financial statements as per a method followed at other country is a tedious task for such multinational organizations. This lead to the requirement of harmonization of accounting standards across the globe or what we can say towards the development of global accounting standards which are better known as International Financial Reporting Standards issued by IASB and comprises of International Accounting Standards issued by International Accounting Standards Board, International Financial Reporting Standards (IFRSs), Interpretations issued by Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC). But when the method of financial reporting is going to be changed that is definitely going to affect the items of the financial statements Blanchette Michel et al. (2012) due to the difference between the national GAAP and IFRSs. The IFRSs are primarily based on the concept of fair value based accounting that is also a reason behind the difference in the value reported under IFRSs and GAAP. All the countries which have converged their accounting standards as per IFRSs have found an impact on the financial ratios. India is also thinking about converging its financial reporting from Indian GAAP to IFRSs soon earlier they have established a dead line also in the form of 1st April 2011 but somehow that dead line could not be followed. Therefore this research paper tries to evaluate the future impact of IFRSs adoption on the financial ratios of Indian companies by taking case of three Indian companies which are already using IFRSs for financial reporting

Type: 
Management
Authors Name: 
Mohd Anam Akhtar, Dr. Ravindra Tripathi