What are the advantages of converting to IFRS?

with benefites of ifrs computations are also high in ifrs

IFRS is a principle based model as compared to rule based US GAAP. IFRS requires extensive use of fair valuations for measurement of assets and liabilities. The objective of IFRS is to set the Balance Sheet right, and hence a significant volatility may come in Profit & Loss statement.

a)       Improved access to Global Market

 Majority of the Stock exchange globally require financial information as per IFRS. If the financial information is as per Indian Accounting Standard then a risk premium is added in pricing.

b)       Lower Cost of Capital

Convergence with IFRS means the Indian companies need not prepare two sets of Financial Statements to comply with the requirements abroad and this would lead to lower cost of administration, removal risk premium and hence pricing and the companies can approach any market for capital.

c)        Benchmarking with Global Peers

Preparing accounts as per IFRS will give better understanding of performance relative to the Global peers / benchmarks. Targets and Milestones will be set based on global business environment instead of Local. 

d)      True Value of acquisition

In Indian GAAP except for a few exceptions net assets acquired is recorded on the carrying value instead of fair value. Hence the true value of the combination is not reflected. IFRS overcomes this flaw as it mandates accounting of business combinations at fair value.

IFRS will help us to be at Par with the International standard. There will be no Historical cost for Stock , It has to be valued on Present Market value thus gives more meaning to the stock figure available in Balance Sheet. It will definately raise another debate on Valuation Part of the stock, equipment and Machineries.

IFRS will help us to show our presence internatioanlly. It will also help us to put our Accounting Practices as we are considered as one of the survival leader in recent Economic meltdown. It will definately help foreign investors to check the accounting / auditing / banking at other international location and adopt the best practices available in Indian accounting system.

In this global economy, a globally accepted standards to be adopted by all countries which makes apple to apple comparison; otherwise the financial statements to be converted again for global comparison.

Companies may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad.

The biggest advantage of adopting IFRS is that financial statements of peer group companies across the globe will become comparable. Still a lot of onus will lie on the auditors to ensure that the "numbers" do reflect a true and fair picture of the company's business and financial position. So, alongwith the adoption of IFRS, the company's auditors should take the initiative to build good financial controls and undertake periodical operations review.

Put it simply, IFRS, in my opnion, attempts to bring all accounting and financial statements, in a more comparable platform, so as to derive meaningful information for the management, promoters, employees and more importantly to the investors and public at large. After all, there has to be a uniform basis, whereby all periodical financial information and results are well informed to the community at large, as the organisation moves toward a globally recognised and operating environment to become an admired company across the world. No one, be it organisation or an individual, can be admired unless there is an effective communicationg tool, globally.

Regards

KS Ramachandran, Chennai, India

+91 98410 71388