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Contemporary Accounting

Notes The industry would be able to raise capital from foreign markets at lower cost if it
can create confidence in the minds of foreign investors that their financial statements
comply with globally accepted accounting standards.
It would reduce different accounting requirements prevailing in various countries
there by enabling enterprises to reduce cost of compliances.
It would provide professional opportunities to serve international clients.
It would increase their mobility to work in different parts of the world either in
industry or practice.
Self Assessment

Fill in the blanks:
9. ………….. means that quality of financial information which exists when that information
influences decisions by users about the allocation of scarce resources.

10. ………….means that quality of financial information which exists when users of that
information are able to comprehend its meaning.
11. IFRS would enhance the …………between financial statements of various companies across
the globe.

Task Discuss the applicability of IFRS in India.

10.4 Challenges in Implementation of IFRS in India

The following are the key recommendations suggested by the task force set up by ICAI in 2006:
1. Lack of Awareness: Adoption of IFRS means a complete set of different reporting standards
have to bring in. The awareness of these reporting standards is still not there among the
stakeholders like firms, banks, stock exchanges, commodity exchanges etc.
2. Training: Professional accountants are looked upon to ensure successful implementation
of IFRS. The biggest hurdle for the professionals in implementing IFRS is the lack of
training facilities and academic courses on IFRS in India. The solution to this problem is
that all stakeholders in the organisation should be trained and IFRS should be introduced
as a full time subject in the universities.

3. Amendments to the Existing Laws: It is observed that implementation of IFRS may result
in a number of inconsistencies with the existing laws which include the Companies Act
1956, SEBI regulations, banking laws and regulations and the insurance laws and
regulations. Currently, the reporting requirements are governed by various regulators in
India and their provisions override other laws. IFRS does not recognise such overriding
laws. Although steps to amend these laws have been initiated, the authorities need to
ensure that the laws are amended well in time.
4. Taxation: IFRS adoption will affect most of the items in the Financial Statements and
consequently, the tax liabilities would also undergo a change. Currently, Indian Tax Laws
do not recognize the Accounting Standards. A complete overhaul of Tax laws is the major
challenge faced by the Indian Law Makers immediately. Enough changes are to be made
in Tax laws to ensure that tax authorities recognize IFRS-Compliant financial statements
otherwise it will duplicate the administrative work for the Firms.

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