The emergence of transnational corporations in search of money, not only for stimulating growth, but to maintain on-going activities has demanded flow of capital from all parts of the globe. This has brought millions of new investors into the capital markets whose interests are not constrained by national boundaries. Every country has its own sets of rules, regulations and reporting standards. When an entity wants to raise capital from the markets other than country in which it is located, the rules and regulations of that country would apply. Translations and re-instatements of financial statements are of extreme importance in a rapidly globalizing world. All this has led to the need of a single set of global accounting standards. These standards are called International Financial Reporting Standards (IFRS). IFRS are issued by the International Accounting Standards Board (IASB), an independent body that was formed in 1973 by the professional accounting bodies in the United States and eight other industrialized countries. India is also on way to adopt these global standards. The Institute of Chartered Accountants of India (ICAI) has announced to converge the Indian Accounting Standards with IFRS by 1st April, 2011.
What is the meaning of IFRS, GAAP, and what does convergence mean. According to Wikipedia, IFRS is explained as the International Financial Reporting Standards. It is considered a principle based set of standards. They establish board rules as well as dictating specific treatments. Another definition would be: A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. GAAP, according to Wikipedia, is a term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction. GAAP includes standards,...