International Financial Reporting System (Ifrs) Convergence

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International Financial Reporting System (IFRS) convergence -effects on Indian banking System
As Indian economy is gradually attuned to the global best practices, the country is slated to converge the Indian Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS) from 01.04.2011 The Banking and Insurance sectors are excluded from this cut off time period and the convergence activities are ongoing. There is need for convergence of RBI guidelines also with IFRS. As it has significant impact on financial position and performance of banks, this study has highlighted the concept of IFRS in general and Banks in particular. It discusses on the impact, gaps and issues relevant to Banking Sector in India and the statutory requirements for smooth transition. The study also concluded with major issues to be addressed within a time period alongwith a suggested course of action.

Key Words: International Financial Reporting Standards, Generally Accepted Accounting Principles, Gaps, Issues in implementation, Statutory requirements, Banking Sector

International Financial Reporting System (IFRS) convergence -effects on Indian banking System

Introduction :
The most important change taking place in accounting and financial reporting is the convergence (adoption) of International Financial Reporting Standards (IFRS) by over 100 countries globally. Either IFRS is to be adopted as it is or the respective “National GAAP” (Generally Accepted Accounting Principles) is to be converged with IFRS. The U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are handling the convergence of IFRS and US GAAP. It will be the global standard for the preparation of public company financial statements.

IFRS are the standards and interpretations adopted by IASB. IFRS are to be applied by entities in order to provide information on financial position, operating performance and cash flow for the benefit of decision makers namely shareholders, creditors, employees and general public. IASB is attempting for global standards that are transparent, enforceable, understandable, and of high-quality.

In India, the first phase of IFRS implementation is expected to commence from 01.04.2011 which is mandatory for public interest entities such as all listed/ to be listed companies, companies with sales threshold over Rs.100 crore and companies with public debt over Rs.25 crore. This has become necessary because of Indian Economy is integrating with global economy. However, banks and Insurance companies have been exempted from this cut of line for certain obvious reasons. It is expected that by 2013, banking system may be asked to converge with IFRS. Thus the IFRS effects on banking system in India has gained importance for this study.

Objectives of the study :
1.To understand IFRS in general
2.To Understand the challenges in transition from Indian GAAP to IFRS 3.To know Indian Banks versus IFRS
4.To understand the benefits of IFRS for Banks in India
5.To find the steps to be taken by Banks in India for switching to IFRS

Need for IFRS in India in general :
1.Underlying assumptions used in IFRS are:

Accrual basis - the effect of transactions and other events are recognized when they occur, not as cash is gained or paid. Going concern - an entity will continue for the foreseeable future.

2.Adoption of IFRS
IFRS are used in many parts of the world, including the European Union, Canada, Hong Kong, Australia, Malaysia, Pakistan, Russia, South Africa, Singapore, so on. In India, it is expected that transition to IFRS will be by 2011 excepting Banking and Insurance sectors.

IFRS is important because businesses are turning global and investors will be able to compare performance under similar standards. Likewise, businesses operating in multiple countries will be able to create financial statements that are...
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