IFRS: ITS RELEVANCE, CHALLENGES AND BENEFITS.
Dr. J.Bordoloi, Associate Professor,
Haflong Govt. College
Ms. B.Bordoloi, Assistant Professor,
Lakhimpur Commerce College
Harmonize, Convergence, Comparability, Reliability, Credibility, Understandability.
The accounting standards are the ideal and standardized practice of accounting which aims to harmonize the accounting language. However the use of different accounting frameworks in different countries creates confusion for users of financial statements. The World has become an economic village due to globalization, privatization and liberalization. All the emerging economies are increasingly accessing the global markets not only in search of customers but to fulfill their capital needs. Increasing complexity of business and globalization of capital markets call for a single set of high quality accounting standards strengthen the confidence investors and other stakeholders of financial statements. IFRS is a single set of high quality, understandable and enforceable globally acceptable accounting standards prepared by taking into consideration the different environment of the world. So there is worldwide momentum for convergence of national accounting standards with IFRS. India cannot isolate itself from the developments taking place worldwide. IFRS converged accounting standards apply to Indian companies in 3 phases. However in our country there will be two separate sets of Accounting Standards as IFRS will be mandatory to a specific group of companies and Indian Accounting Standards are applicable to all other companies for whom IFRSs are not mandatory. IFRS conversion is more than an accounting change and may affect many aspects of a company. Though convergence to IFRS is a painstaking and a long process, it is expected that the adoption of IFRSs will have significant positive effects in the corporate world over the years to come.
Accounting is judged as a language of business. The accounting statements generated by accounting process are the end products accounting of language through which a business house communicates its information to the outside world. In order to make the accounting language and the statements comprehensible, comparable, verifiable, and reliable by all it should be based on some uniform rules. The accounting standards are the ideal and standardized practice of accounting which aims to harmonize the accounting language. With the ongoing globalization process, there is a need that the financial statement presented must be based on uniform accounting standards so that whatever information it wants to communicate it is understand by all.
Globalization, liberalization and privatization of business have created international environment of business. The Indian corporate sector has to keep pace with the changing environment for its survival and growth. The success of a company now depends on its area of operation. The companies operate globally not only for widening markets for its product for revenue generation but also for raising funds for their expansion. To keep pace with this changing environment, opportunities and competition some strategic changes are invariably have to be made for making the Indian companies more acceptable for global communities. Convergence with the global norms is a part of India's commitment to have a consistent and uniform financial reporting system for good corporate governance.
The uniformity in accounting terminology, approach and presentation is essential because financial statements prepared in one nation must be understood, accepted and relied in other nations of the world. The necessity for uniformity in accounting matters was more realized throughout the world after War II for repairing the war affected economy and free flow of international trade, investment and...
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