1. INTRODUCTION:

The movement of liberalization and globalization has opened up the world economies for international business. The process of globalization and liberalization has increased the volume of business in the last couple of decades by emphasizing the need for transparency and consistency in the working of business organisations. The recording and maintaining of accounting records is of great importance for all the companies. The journey to have a common set of accounting standards started long before to give it a professional shape and essence. The accounting professionals all over the world feel the necessity to reduce the gap among different streams of accounting practices through harmonization. This has resulted in ‘an accounting revolution’ which is pointed out by (Beaver, 1998) and (Elliott, 1998) stated it as ‘redefinition of accountancy’ through their research work. The financial statements are designed and prescribed to improve and benchmark the quality of financial reporting.

They bring about uniformity in financial reporting and ensure consistency and comparability in the data published by enterprises. The common financial reporting standards bring global community a single entity. These are aimed at furnishing useful information to different users of the financial statements, such as shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers, regulatory bodies and society at large. Because of globalization, the awareness of investors in capital markets has increased manifold and the size of investors is multiplying. Foreign institution investment (FIIs), GDRs (Global Depository Receipts) and ADRs (American Depository Receipts) instruments boosting the global investors for global investment. Therefore, the need for harmonization of accounting standards has been strongly encouraged globally in order to faster the economic decision-making process. The single accounting standard is developed and it is implemented by few nations and few economies including India are preparing for the convergence.

There are number of studies which investigated the impact of changes in financial reporting system. Following are the representative viewpoints of the various studies on accounting standards. Volmer, Werner, and Zimmermann (2007) analysed the recent changes of accounting regulation in Germany. They developed a general framework for comparing accounting regimes and found that privatization tendencies in accounting governance necessitate international convergence. Gallhofer and Haslam (2007) elaborated an immanent critique of the International Accounting Standards Board (IASB), critically exploring its claim to serve the public interest by reference to its character and position, its official principles and its work campaigns to disaggregate accounting focused on extractive industries and operating segments. They attempted a rescuing critique, indicating IASB’s potential to better serve the public interest. Elad (2007) analysed the ideological role of International Accounting Standard (IAS) 41 in legitimating social conflict in the context of fair trade coffee and forestry companies that were compelled by domestic legislation to adopt a full-fledged fair value accounting model in conformity with structural adjustment reforms instituted by the World Bank. It was found that market-driven approach can be used by the fair trade movement and the Forest Stewardship Council (FSW) to accomplish the ultimate goal of defetishizing commodities and impediments to the implementation of IAS 41 in both industrialized countries and less developed countries. Biondi and Zhang (2007) provided a comprehensive comparative analysis between the standards of the IASB and Chinese accounting standards. The comparison casts doubt on the ultimate convergence of Chinese and IAS. Robb and Newberry (2007) illustrated the impact of accounting practices on constitutional and political issues and also explained the International Public Sector Accounting Standards (IPSAS) developments by taking the evidence from New Zealand and found that the country should consider constitutional and political implications before proceeding to business-style governmental accounting development. Armstrong et al (2010) found out a positive reaction to IFRS adoption events for firms with high quality pre adoption information, consistent with investors expecting net convergence benefits from IFRS adoption. Siqi (2010) concluded that on average, the IFRS mandate significantly reduces the cost of equity for mandatory adopters. He also suggested that this reduction is present only in countries with strong legal enforcement, increased disclosures and enhanced information comparability. Cai and Wong (2010) summarized that the capital markets of the countries that have adopted IFRS have higher degree of integration among them after their IFRS adoption as compared to the period before the adoption.

The demographic developments, fraudulent conduct of reporting entities or the globalization of capital markets, the need for uniform financial statements, listing of companies from different countries in various stock exchanges around the world etc. are the reasons for developing common accounting language for the globe. Many countries have adopted the IFRS and India is also in the process of their implementation. This task is not going to be a smooth affair. Neither can it be implemented without regard to the benefits and the challenges that need to be faced. Therefore, there is a need to understand the benefits and challenges of implementing the IFRS in India. This study focuses on two aspects of IFRS implementation viz. benefits and challenges of IFRS. The study is organized in five sections as follows: Section 2 provides a brief discussion about the adoption of IFRS worldwide and in India; Section 3 describes utility for India in adopting IFRS; Section 4 presents IFRS implementation challenges in India:; Section 5 presents conclusions.

2. Adoption of IFRS worldwide and in India:

International Financial Reporting Standards (IFRS) is considered as the global accounting language. Many developed and developing countries are now adopted IFRS and many more are in the process of convergence. The benefits of global standards are widely recognized. For companies, the conversion of accounting standards to IFRS is a major change and it help them for common reporting which increase the international business through global investment. For implementation there is a need for common guidelines and as requirement The International Accounting Standards Board (IASB) has published IFRS 1 in 2003. The IFRS 1 covers the application of IFRS in a company's first IFRS financial statements. It starts with the basic premise that an entity applies IFRS for the first time on a fully retrospective basis.

IFRS is a new concept that in many cases is vastly different from the manner in which it treats the accounting of items in a company's profit and loss account and the balance sheet. The adoption of IFRS and plans for convergence differ widely by jurisdiction. The main intention of IFRS Foundation and the IASB is to develop, a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards. To achieve this goal the IASB works in close cooperation with all the stakeholders around the globe, including investors, national standard-setters, regulators, auditors, academics, and others who have an interest in the development of high-quality global standards. The progress in this regard is satisfactory. All major countries have established time schedule for converge with IFRSs in the near future. The following is the status of various economies in the globe.

Convergence with IFRS has strategic implications and will require harmonization of internal and external reporting. Preparing for convergence is the key to success. It is important that companies plan the transition process and anticipate issues that the business will face by using the IFRS converged standards. Grant Thornton member firms both in India and other parts of the world have significant experience of having worked with companies which are implementing IFRS. They understood the key challenges faced by companies and helping them to overcome. The IFRS team in India is helping in preparing the groundwork for the adoption process.

In India the process of convergence with IFRS has been primarily carried out by Ministry of Corporate Affairs (MCA) through wide ranging consultative and participative exercise with all the concerned stakeholders. The MCA, which is spearheading the plan of convergence in India, has set up a High Powered Core Group comprising various stakeholders, including SEBI, for convergence with IFRS. The Core Group is supported by two sub-groups, headed by Shri Y.H. Malegam, Chairman, National Advisory Committee on Accounting Standards and Shri Mohandas Pai, Director, Infosys and Member, SEBI Board, respectively.

Country	Status for listed companies as of December 2011
Argentina	Required for fiscal years beginning on or after 1 January 2012
Australia	Required for all private sector reporting entities and as the basis for public sector reporting since 2005
Brazil	Required for consolidated financial statements of banks and listed companies from 31 December 2010 and for individual company accounts progressively since January 2008
Canada	Required from 1 January 2011 for all listed entities and permitted for private sector entities including not-for-profit organisations
China	Substantially converged national standards
European Union	All member states of the EU are required to use IFRSs as adopted by the EU for listed companies since 2005
France	Required via EU adoption and implementation process since 2005
Germany	Required via EU adoption and implementation process since 2005
India	India is converging with IFRSs at a date to be confirmed.
Indonesia	Convergence process ongoing; a decision about a target date for full compliance with IFRSs is expected to be made in 2012
Italy	Required via EU adoption and implementation process since 2005
Japan	Permitted from 2010 for a number of international companies; decision about mandatory adoption by 2016 expected around 2012
Mexico	Required from 2012
Republic of Korea	Required from 2011
Russia	Required from 2012
Saudi Arabia	Required for banking and insurance companies. Full convergence with IFRSs currently under consideration.
South Africa	Required for listed entities since 2005
Turkey	Required for listed entities since 2005
United Kingdom	Required via EU adoption and implementation process since 2005
United States	Allowed for foreign issuers in the US since 2007; target date for substantial convergence with IFRSs is 2011 and decision about possible adoption for US companies expected in 2011.

Source: IFRS Foundation, (2012), ‘The move towards global standards’, available at

http://www.ifrs.org/Use+around+the+world/Use+around+the+world.htm.

3. Benefits of IFRS Adoption in India:

Economies across the globe have benefitted by adopting IFRS for financial reporting purposes. This study will try to identify some of the benefits with respect to the firms in India and also India as a country. The convergence to IFRS will reduce reporting costs by developing common reporting systems and will ensure consistency in statutory reporting. It will provide more access to foreign capital, cross border acquisitions and joint venture will be possible. The financial reports prepared under IFRS will encourage the Indian companies to trade their securities on stock exchanges world-wide. IFRS will ensure greater transparency in the financial statements by fair value concept. Large business houses in India like Tata, Birla, and Ambani have firms registered in India and also firms registered outside India in European and American capital markets. Apart from these business groups, major IT companies like Infosys, Satyam are listed in the US markets. A number of companies in India have raised their capital in foreign markets through ADR and GDR routes. Adoption of IFRS ensures the elimination of multiple financial reporting standards by these firms as they are following single set of financial reporting. It helps in cross border investments which lead to economic growth of the country. Since IFRS is a common accounting language for the globe the benchmarking and comparability of financial statements of Indian companies with companies anywhere in the world is possible. There is a great encouragement for world trade. The administrative costs of accessing the capital markets around the world will be reduced. The above benefits are perceived benefits of adoption of IFRS because India is in the process of implementation.

4. IFRS implementation challenges in India:

In spite of these benefits, adoption of IFRS in India is difficult task and the country faces many challenges. A few of these have been listed below. The entire set of financial statements will be required to undergo a drastic change. It would be a challenge to bring awareness about the new practice. The biggest challenge is lack of training facilities and academic courses for accounting professionals on IFRS in India and it results in acute shortage of trained IFRS staff. For better implementation the various stakeholders, employees, auditors, regulators, tax authorities, etc. would need to be trained. Unlike several other countries, the accounting framework in India is deeply affected by laws and regulations. The IFRS requires some amendments to the existing laws. Changes may be required to various regulatory requirements under the Companies Act, 1956, Income Tax Act, 1961, SEBI, RBI, etc. so that IFRS financial statements are accepted. Differences between Indian GAAP and IFRS may impact business decision and financial performance of an entity. There will be increase in initial cost due to dual reporting requirement which entity might have to meet till full convergence is achieved.

5. CONCLUSION:

A high quality corporate financial reporting environment depends on effective control and enforcement mechanism. The IFRS compliances will need a lot of co-ordination among various regulatory authorities and framework like ICAI, SEBI, Companies Act, IRDA, RBI etc. In order to ensure timely adoption of IFRS in India, trained accountants and auditors in IFRS are required in large number. The ICAI has started IFRS training programmes for its members and other interested parties. A successful transition requires a well thought plan well in advance. Many of the Indian companies have listed their securities in foreign capital markets and therefore, the adoption of IFRS ensures that there are no different sets of financial statements. While convergence is essential for India, it cannot be done without regard to the legal and regulatory changes in the country. These are the challenges that the country has to address to converge of Indian GAAP to IFRS. With different systems put in place, the IFRS adoption in India should become a smooth affair.

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Received on 01.02.2014 Modified on 25.04.2014

Asian J. Management 5(3): July-September, 2014 page 293-296