Problems and Challenges in First Time Adoption

INTERNATIONAL RESEARCH & REVIEW 17
International Indexed & Referred Research Journal, ISSN- 2250-2556; VoL. I *ISSUE-1, April, 2012. 1.1 Introduction:
India today has become an international economic force.
To stay as a leader in the international market, India
opted the changes it need to interface Indian stakeholders', the international stakeholders' and comply
with the financial reporting in a language that is understandable to all of them. The International Financial
Reporting Standards (IFRS) aims to make international
financial reporting comparisons as easy as possible
because each country has its own set of accounting
rules. It is a set of international accounting and reporting standards that will help to harmonize company
financial information, improve the transparency of
accounting, and ensure that investors receive more
accurate and consistent reports.
1.2 Objectives Of The Study:
1) To study the Problems and Challenges faced by
Indian Companies in the process of Convergence to
IFRS. 2) To focus on the Measures taken to address the
Challenges.
1.3 Methodology:
For the purpose of the present study, mainly
literature survey and secondary data has been used.
The required secondary data was collected from the
authorized Annual Reports and Official Website of
ICAI and IFRS, various Journals and Research Papers,
diagnostic study reports and newspaper articles have
been surveyed in making this study.
1.4 Problems And Challenges:
Despite several benefits as may be looked out
by the different people, there will be several challenges
that will be faced on the way of IFRS convergence.
1. Difference in GAAP and IFRS:
Adoption of IFRS means that the entire set of
financial statements will be required to undergo a drastic
change. The differences are wide and very deep
routed.It would be a challenge to bring about awareness
of IFRS and its impact among the users of financial
statements.
IFRS- Problems and Challenges
In First Time Adoption
* Sunita Ajaykumar Rai
A B S T R A C T
Trust and transparency led to a discussion of the fundamental purpose of financial reporting. Consistent, comparable and understandable financial information is the lifeblood of commerce and making investment. In India the Institute of Chartered Accountants of India (ICAI) has decided to adapt IFRS for accounting periods commencing on or after April 1, 2011. This paper deals with the Problems and Challenges faced in the process of convergence in Indian perspective and measures taken to address the challenges.

2. Issue of GAAP Reconciliation:
The Securities Exchange Commission(SEC)
laid out two options in its proposal-one calling for the
traditional IFRS first-time adoption reconciliation, the
other requiring that step plus an on-going unaudited
reconciliation of the financial statements from IFRS to
U.S. GAAP. Clearly the second one is a more costly
approach for companies and for investors.
3. Training and Education:
Lack of training facilities and academic courses
on IFRS will also pose challenge in India.There is a
need to be educated on IFRS and its application.Charles
Noski, former chief financial officer and Vice Chairman
of the Board of AT&T Corporation and a former Deloitte
&Touche partner noted that"Educating 100,000 employees
on how they must do their business is not a
trivial activity,"
4. Legal and Regulatory considerations:
Currently, the reporting requirements are
governed by various regulators in India and their provisions override other laws. IFRS does not recognise
such overriding laws. The regulatory and legal requirements
in India will pose a challenge unless the same is
been addressed by respective regulatory.
5. Taxation:
IFRS convergence would affect most of the
items in the financial statements and consequently the
tax liabilities would also undergo a change. Thus the
taxation laws should address the treatment of tax liabilities arising on convergence from Indian...
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