IFRS refers to the entire body of IASB pronouncements, including standards and interpretations approved by the IASB, IASC, and SIC. The application of IFRS requires an increased use of fair
values for measurement of assets and liabilities. The focus in IFRS is more towards getting the balance sheet right and hence brings significant volatility in the income statement.
The year 2000 was significant forIAS, now known as IFRS. The International Organisation of Securities
Commission formally accepted the IAScore standards as a basis for crossborder listing globally. In June 2000, the European Commission passed arequirement for all listed companiesin the European Union to preparetheir CFS using IFRS (for financialyears beginning 2005). Since 2005,the acceptability of IFRS hasincreased tremendously.There are now more than 100countries across the world where IFRS is either required or permitted. This figure does not include countries such as India, which do not follow IFRS but
their national GAAP is inspired by IFRS.
Benefits of adopting IFRS :-
The decision by ICAI to converge with IFRS is a milestone decision and islikely to provide significant benefits toIndian corporates.Improved access to Internationalcapital markets.
Many Indian entities are expanding or making significant acquisitions in the global arena—for which huge capital is required. Majority of stock exchanges require financial information prepared under IFRS. Migration to IFRS willenable Indian entities to have access to international capital markets, without the risk premium involved in IndianGAAP financial statements.Lower cost of capital Migration to IFRS will lower the costof raising funds, as it will eliminatethe need for preparing a dual set offinancial statements. It will also reduce accountants’ fees, abolish risk premium and will enable access to all major capital markets as IFRS is globally acceptable.Enable benchmarking with global peers and improve brand valueAdoption of IFRS will enable companies to gain a broader and deeper understanding of the entity’s relative standing by looking beyond country and regional milestones.Further, adption of IFRS will facilitate companies to set targets and milestones based on global business environment, rather than merely local ones.
Escape Multiple ReportingConvergence to IFRS, by all groupentities, will enable company managements to get all the components of the group on one financial reporting platform. This will eliminate the need for multiple reports & significant adjustment for preparing CFS or filling financial statements in different stock exchanges.
Reflects true value of acquisitions In Indian GAAP, business combinations,with few exceptions, are recorded at carrying values and not at fair valuesof net assets taken over. Purchase consideration paid for intangible assets not recorded in the acquiree’s books is usually not reflected separately in the financial statements; instead the amount gets added to goodwill.Hence, true value of the business combination is not communicated through financial statements. IFRSwill overcome this flaw as it mandates accounting for net assets taken over in a business combination at fair value. It also requires recognition of intangible assets, even though they have not been recorded in the acquiree’s financial statements.