Indian Accounting Standards Research Articles

Implementation of IFRS as Indian Accounting Standard for Similarity in Financial Reporting in India: Challenges & Benefits

International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB), a committee of14 memberswho are from nine different countries work together to develop global accounting standards. At present, there are two sets of accounting standards that Generally Accepted Accounting Principles (GAAP), USA based and International Financial Reporting Standards (IFRS) have been issued by International Accounting Standards Board (IASB), London based. Generally Accepted Accounting Principles (GAAP) arevery different in nature but based on a few basic principles of GAAP rules.India also set up its own accounting standard namely Indian Accounting Standard (Ind-AS) from April, 2015to fulfilling all the requirement of IFRS in the country for matching the gap between IFRS and Indian accounting standards. This study is based on secondary data tries to investigate the benefits & challenges of IFRS application from which India can draw a lesson towards implementation of IFRS, converged Ind-AS and recommends must do reflections for a successful takeover. It highlights main benefits of IFRS adoption to include; enhanced transparency & comparability; improved quality of accounting information; reduced cost of processing information; augmented cross border investments & acquisitions; substantiated economic growth and financial stability. It recommends to the countriesvarious prerequisites are necessary for effective application and conformance with IFRS to store full benefits.This paper also presents a literature about the benefits of adoption of IFRS and related implementation challenges, reflects for successful application of converged Indian Accounting Standards (Ind-AS). Finally the paper presents the significance of IFRS and challenges for implementation.

Review on convergence of Indian accounting standards with IFRS by Indian companies

The present literature review encompasses the impact of IFRS in Indian companies and development of new Indian Accounting Standards in line with IFRS. International Financial Reporting Standards (IFRS) or converged Indian Accounting Standards (Ind AS) and its implications are essential for Indian companies. India has decided to converge with IFRS, which means that India will have its own converged accounting standards in line with the IFRS. On January 2, 2015, the Ministry of Corporate Affairs notified (PIB, 2015) that Ind AS would be mandatory applicable for accounting period ending March 31, 2016 for companies falling under certain class. It is expected that once these are implemented, it will have an important impact on financial statements of companies. This convergence will benefit Indian companies as they would be comparable to the peers globally, which in turn would lead to a greater equity and debt participation by global players, thus arranging fund would be easier and cheaper.

Futures market efficiency and effectiveness of hedge in Indian currency market

PurposeCorporate treasurers manage the currency risk of their organization by hedging through futures contracts. The purpose of this paper is to evaluate the effectiveness of hedging by US currency futures contracts by taking into account the efficiency of the currency market.Design/methodology/approachThe static models for calculating hedge ratio are as popular as dynamic models. But the main disadvantage with the static models is that they do not consider important properties of time series like autocorrelation and heteroskedasticity of the residuals and also ignore the cointegration of the market variables which indicate short-run market disequilibrium. The present study, therefore, measures the hedging effectiveness in the US currency futures market using two dynamic models – constant conditional correlation multivariate generalized ARCH (CCC-MGARCH) and dynamic conditional correlation multivariate GARCH (DCC-MGARCH).FindingsThe study finds that both the dynamic models used in the study provide similar results. The relative comparison of CCC-MGARCH and DCC-MGARCH models shows that CCC-MGARCH provides better hedging effectiveness result, and thus, should be preferred over the other model.Practical implicationsThe findings of the study are important for the company treasurers since the new updated Indian accounting standards (Ind-AS), applicable from the financial year 2016–2017, make it mandatory for the companies to evaluate the effectiveness of hedges. These standards do not specify a quantitative method of evaluation but provide the flexibility to the companies in choosing an appropriate method which justifies their risk management objective. These results are also useful for the policy makers as they can specify and list the appropriate methods for evaluating the hedge effectiveness in the currency market.Originality/valueMajorly, the studies on Indian financial market limit themselves to either examining the efficiency of that market or to evaluate the effectiveness of the hedges undertaken. Moreover, most of such works focus on the stock market or the commodity market in India. This is one of the first studies which bring together the concepts of efficiency of the market and effectiveness of the hedges in the Indian currency futures market.

Accounting Practices for Agri-Commodity Derivatives between India and South Africa

Developing the comprehensive accounting for the derivatives has become a challenge for all the accounting bodies around the world. In India government has taken several initiatives to bring Agri- Commodity derivatives trading into main stream, so that it can solve the problems such as price fluctuation, price manipulation and ineffective price discovery which are the major treats to the Indian economy that to the farmers. Hence in this study Indian accounting standards are compared with international Financial Reporting Standards for the derivatives accounting. For this sample of three companies from each country are selected with basic criteria has the companies must use. Agri-Commodity derivatives in their risk management parties. Independent samples t-test has been used to analysis the collected date. The results of the study reveal low level of derivatives reporting among these countries.

Determinants of Financial Derivative Disclosures in an Emerging Economy: A Stewardship Theory Perspective

The accounting system in India is undergoing a significant change. With the notification of Companies (Indian Accounting Standards) Rules 2015, the Ministry of Corporate Affairs in India converged the Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS) which was applied in a phased manner from 1 April 2016 beginning with large companies whose net worth was equal to or exceeded INR 5 billion, followed by its implementation for smaller companies with net worth between 2.5 billion to 5 billion thereafter. Among other accounting standards, Financial Instruments Standards Ind AS 32, 109 and 107 that defines, recognises, measures and specifies disclosure norms of financial instruments including financial derivatives were introduced. Warren Buffet very famously called derivatives, “financial weapons of mass destruction,” and giving credence to his views, time and again, financial as well as non-financial firms in India and around the world have sustained losses due to the usage of financial derivatives. Over the years, the capital markets have changed, and business models have become more challenging with complex sources of risk and uncertainty which has transformed risk management into a sophisticated art. This complex and ever-changing business environment has brought to the fore the necessity and importance of developing reliable and relevant disclosure norms to help protect all stakeholders, as derivatives, due to their underlying complex nature, can be a significant source of systematic risk. This is also reiterated, with shareholders and investors stepping up the demand for increased financial disclosure. This empirical study models the factors that determine Financial Derivative Disclosure of Indian non-financial firms The study develops a self-constructed unweighted Financial Derivative Disclosure Index (FDDI) to measure the derivative disclosure. The sample represents companies from Nifty 50, out of which banking and financial services companies were removed. Using multiple regression model, this study modelled the corporate governance factors which determine derivative disclosure. The factors identified were presence of usage of derivatives, size, foreign income, presence of risk management committee, institutional shareholding and binary variable for family business. The results show that the stewardship theory explains the determinants of financial derivative disclosure in Indian context, and promoters act as stewards and guide their firms to improve their financial derivative disclosures.

IFRS convergence: opportunities and challenges in India

Past decade has witnessed several changes in the process of conduct of business activities across the world especially due to the wave of globalization. It has also made drastic changes in the process of financial reporting, in particular the continuing adoption of IFRS (International Financial Reporting Standards) worldwide. IFRS are high quality, understandable, enforceable and globally acceptable accounting standards issued by IASB (International Accounting Standard Board). Thus these are a set of international accounting standards stating how a particular type of transaction and other events should be reported in the financial statements. Thus IFRS are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. IFRS is becoming the global language of business with over 40% of the world adopting this as their standard for reporting. India also decided to converge to IFRS from 1st April 2016 in a phased manner, which in turn improves the financial statement comparability and transparency that helps to attract greater cross border investments. This paper focuses on the convergence of IFRS with Indian Accounting Standards, its utility, issues and challenges faced by the stakeholders. It also throws light to the ways through which problems can be addressed.

The Value Relevance Of Straight-Lining Lease Expenses

The International Accounting Standards Board envisions the global acceptance of International Financial Reporting Standards (IFRS). Despite attempting convergence with IFRS, some national accounting standard setters, such as in India allow for certain carve-outs in their own accounting standards so as to meet country-specific requirements for fair presentation. Indian Accounting Standards allow for operating leases with fixed inflationary linked escalations to be accounted for on an as-incurred basis in contrast to the existing requirement in IFRS to straight-line such leases. This study explores whether operating lease expenses with fixed inflationary linked escalations and accounted for on a straight-line basis provide incremental value relevance beyond the as-incurred basis.This study exploits an occurrence in South Africa, where listed companies that previously accounted for operating leases with fixed inflationary-linked escalation clauses on an as-incurred basis, were required to straight-line those leases. Using the Ohlson (1995) valuation model this empirical study investigates the incremental value relevance of the straight-line basis over the as-incurred basis.Results show a significant change in the association between property-related operating lease expenses and market value indicators after the effect of straight-lining is introduced. This suggests that the straight-line basis provide investors with more value relevant information than when accounting for the expense as-incurred.Findings from this study prompt national accounting setters that allow for operating leases with fixed inflationary linked escalations to be accounted for on an as-incurred basis to consider first whether the straight-line basis do not provide more relevant information. Limiting the choice of accounting treatment may enhance comparability of financial statements.

Cost-benefit analysis of IFRS adoption: developed and emerging countries

PurposeThe paper aims to build a greater understanding of countries transitioning from local generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS). Second, the study assembles prior literature and examines the issues raised during the convergence. Finally, the paper recognises the implications of successful convergence practices that may be useful to other emerging markets and particular reference to India which is transitioning from local GAAP to IFRS-based principles.Design/methodology/approachThe present study is a qualitative analysis that explores the Cost-benefit outcome carried by developed nations. The paper segregates the literature into three segments: developed nations, East Asian countries and the Brazil, Russia, India and China (BRIC) nations.FindingsThere are numerous issues and implications divulged from studies pertaining to the adoption of IFRS, i.e. corporate governance, fair value accounting and other environmental concerns. The paper further illustrates instances of dissimilarity of the Indian Accounting Standards to the IFRS.Research limitations/implicationsIt is evident from the literature that limited studies have been carried out in the context of East Asian countries and BRIC nations in comparison to the developed nations. Further research should provide more comprehensive empirical evidence on the outcome of mandatory adoption of IFRS on firms in emerging countries.Originality/valueThe paradigm practice of mandatory adoption of IFRS by developed nations can be an insight for emerging countries that participate in the capital markets and for companies in compliance with the IFRS.

Impact Of Local Accounting Standard On IFRS For Defining Firm’s Capital Structure: An Analysis Based On Indian Companies

In this study, the main purpose is to examine the impact of Indian Accounting Standard on International Financial Reporting Standards (IFRS) for defining capital structure components, which has been expressed as ratios. The study employed an innovative design known as “same firm-year” research design (2010-11) and effort is being made to understand its impact. Regression analyses were used to test the statistical significance of this impact and ANOVA were used to test the hypothesis. Main finding from the study is that Indian Accounting Standard has a great impact on IFRS for disclosing the capital structure components. IFRS and Indian Accounting Standards are interrelated for defining the capital structure components. The study found that Indian AS and IFRS are inter-related for disclosing the capital structure components.

Convergence with International Financial Reporting Standards (IFRS) in India

The globalisation prompt more and more countries to open their doors to foreign investments and as the business expand across borders the need arises to recognize the benefits of having commonly accepted and understood financial reporting standards. The sound financial reporting standards underline the trust that investors place in financial reporting information: and thus play an important role in contributing to the economic development of a country. The mission of International Accounting Standards Board (IASB) is to develop a single set of financial reporting standards that are accepted worldwide. The Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) is committed to convergence of its standards with those of IASB. However, deviations from International Financial Reporting Standards (IFRS) have been noted due to the some unavoidable reasons like legal and regulatory requirements, economic environment, level of preparedness and conceptual differences etc. Thus it can argued that even there has been lot of deliberation on convergence of Indian accounting standards with IFRS, it is difficult to adopt IFRS considering the indigenous problems.The present paper discusses the IFRS adoption in India and the utility for India in adopting IFRS, the problems and the challenges faced by Indian corporate in adopting IFRS. This paper will help in better understanding of this new language of financial reporting.

Analysis of perceptions of auditors/chartered accountants’ on selected Indian accounting standards

<p>Indian accounting standards are not only principle based but also based on users’ perceived ethical notions on professional ethics and compliance with professional code of conduct that are issued by the Institute of Chartered Accountants of India (ICAI).Codes of conduct for accountants give guidelines for proper behavior in the profession. The present study attempts to understand the perceptions of practicing auditors and professional Chartered Accountants (CAs) on the Indian accounting Standards and adherence to the professional code of conduct issued by the ICAI. The study is based on a survey conducted among a sample of qualified CAs. On the basis of the findings, the study concluded that ethical accounting standards are fundamentally necessary for accountants to produce quality financial reports free from material misstatements.</p>

Globalisation of accounting standards and competitive posture of Indian companies

Unification of the global financial reporting system is essential to enable comparability of financial statements at the international level in post crisis competitive environment. IFRSs are increasingly gaining acceptance as global accounting standards. With European Union adopting the IFRS in 2005, as on date over 116 countries have already either converged their accounting standards with IFRS or adopted IFRS as such and many more are in the process. Countries refusing IFRS are likely to be viewed as more risky by the international investors thereby affecting the inflow of capital to such countries. In India, the Institute of Chartered Accountants of India (ICAI) the apex body dealing with accounting standards has declared the roadmap of IFRS convergence in a phased manner from April 1, 2011. Our paper highlights the status of Indian accounting standards converging to IFRS as of now. In addition, a full fledged theoretical framework is developed showcasing, the convergence timeline, the major differences in the treatment of select items under these two alternative accounting environments, exact stage at which the Indian accounting standards are today in view of the announced convergence to IFRS and the legal and regulatory issues in converging to IFRS in India. We investigate the case of 150 odd firms and show the impact of convergence on financial ratios and the related valuation concerns. Finally, we indicate the strategic implications of IFRS adoption to Indian companies.

International Financial Reporting Standard (IFRS): Prospects and Challenges

Consistent, comparable and understandable financial information is the lifeblood of commerce and making investment. The idea of global harmonization of accounting standards stems from lack of comparability of financial statements across the country. Increasing cross border investing and proliferation of financial products have posed a challenge to companies as they faced multiple standards. Harmonization and convergence with IFRS can greatly contribute to the efforts to build global financial reporting infrastructure. This resulted in international initiative of convergence of Accounting Standards to a common standard viz. the International Accounting Standards/ International Financial Reporting Standards (IFRS). In India, the ICAI formulates the accounting standards on various issues. But since last few years, the aim has been following the IFRS to the extent possible. Henceforth, while issuing accounting standards, IFRS need to be adopted suitably. However, deviations from IFRS have been noted due to some unavoidable reasons like legal and regulatory requirements, economic environment, level of preparedness, conceptual differences etc. Thus, it can be argued that even if there has been a lot of deliberation on convergence of Indian accounting standards with IFRS, it is difficult to adopt IFRS considering the indigenous problems. In order to resolve this problem, the ICAI has given a roadmap through which, IFRS can be adopted in India in a phased manner. This analytical Paper deals with concept, objective and benefits of convergence with IFRS and explores the way how we converge the Indian GAAP with IFRS. Problems and challenges faced in the process of convergence in Indian perspective have been thoroughly discussed. This paper also focuses on IFRS prospects in Indian scenario. This paper puts forward a view point that convergence will bring forth galore benefits to investors, industry, professionals and the economy as a whole.

Convergence of Indian Accounting Standards with IFRS – Tax Implications

As India converges its domestic accounting standards with the International Financial Reporting Standards, a number of tax issues arising from this convergence will arise. This article looks at these tax issues and the steps taken to mitigate them.

DOES IFRS INFLUENCE EARNINGS MANAGEMENT? EVIDENCE FROM INDIA

The issue of earnings management has always been an anxiety for the reliability of published accounting reports. Previous studies have shown that accounting standards add value to accounting information in the developed economy. However, it is uncertain whether such benefits also apply to developing or emerging economies. In spite of the fact that authors classified India as one of the countries that engage in the highest levels of earnings management in the world, there were very few studies on earnings management in India with no inferences on influences of accounting standards on earning management. It is still an open question as to whether the adoption of international standards improves the quality of accounting information, thereby reducing the level of earnings management. With this background, the emerging market in India provides a unique opportunity to examine whether the firms in India, adopting international standards, is associated with reduced level of earnings management and thus have better reported earnings than non adapting firms, which is the objective of this study. For the purpose of analysis, regression model is used by taking ‘IFRS adoption’ as independent variable and ‘opportunistic earnings management’ as dependent variable. The sample size is 100 large Indian companies and the earnings quality is measured by the modified Jones model. Our results contradict most of the previous findings based on developed countries by indicating that firms adopting International Standards are more likely to smooth earnings compared to non-adopting firms. These findings could prompt the regulators to think about the effectiveness of IFRS in reducing opportunistic earnings management in an emerging economy, like India. It is especially relevant in Indian context now when the Indian accounting standards are undergoing substantial changes with the convergence of IFRS in a phased manner.

Web-Based Corporate Reporting Practices in India

The present study on Web-based Corporate Reporting Practices in India examines the disclosures of financial and non-financial information disclosures on websites of companies. For the purpose of this study, a sample of 200 companies of BSE-200 Index has been taken. A worksheet has been prepared to examine the trends in web-based corporate reporting in these companies. The compliance of accounting practices to the requirements of Indian Accounting Standards has also been examined in the study. In addition to the secondary data taken from the websites of these companies, two questionnaires have also been used to collect primary data from various stakeholders. In all, the researcher could collect information from 255 respondents through Internet and personal interactions with them. that web-based corporate reporting is at its evolutionary stage and there are many issues which need to be settled to make way for its faster growth on sound footing. The concept has many advantages to offer to stakeholders and corporates. Rather it is now inevitable and no country can afford to ignore it to be a part of global economy. India need to take some immediate steps in the direction of convergence of Indian Accounting Standards with International AS, standardisation of web-based corpoarte reporting, e-security issues, internet penetration at mass level and providing legal support to emerging web-based reporting system and practices.

Accounting Standard Disclosure Compliance in Online Reporting by Indian Companies

This research paper examines the extent of compliance of web-based corporate disclosure with the requirements of Indian Accounting Standards (AS). The online annual reports were available for 132 companies, out of the total sample of 200 companies and these were studied for their compliance to AS. A worksheet has been prepared to determine disclosure score known as Accounting Standards Disclosure Index (ASDI). The relationship between accounting standards disclosure index and company characteristics including nature of industry, affiliation to business house, age, size, profitability, liquidity, ownership and leverage has been studied. Results reveal that relationship between industry sector, affiliation with business house and profitability of company with accounting standards disclosure index is significant.

The evolution of Indian accounting standards: Its history and current status with regard to International Financial Reporting Standards

Abstract This paper addresses the adoption and applicability of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) to India. Specifically, the paper highlights some major areas where the country lacked harmonization with IAS in 1993 and the rapid congruence with IAS in the decade that followed. The attempt to achieve congruence with IAS appears to be more a by-product of the country's rapid economic growth rather than its catalyst. However, continued growth and the attraction of foreign capital to domestic ventures will depend on the transparency of the financial dealings. The Institute of the Chartered Accountants of India, (ICAI), India's standard setting body, is increasingly attempting to provide this transparency by revisions and additions to accounting standards, and by Exposure Drafts which aim to bring India more in line with International Financial Reporting Standards.

Impact of IFRS Convergence in India: An Evidence from First-Time Adoption of Indian Accounting Standards

The aim of this paper is to examine the impact of legal creation of audit committees on financial firm performance. Precisely, we examine the impact of the establishment of audit committee, following the enactment of Ordinance No. 2008-1278, on financial firm market performance. Moreover, we investigate whether the audit committee characteristics such as independence of the members of the audit committees, the size; the accounting and financial expertise of the committee members as well as the frequency of audit committee meetings determine financial performance.We choose two measures for performance namely ROE and ROA. We conduct a panel study for a sample of 100 French companies listed on the Paris Stock Exchange from 2007 to 2015.The results show that the appearance of a legal text pushes the establishment of the committee but has no significant effect on the company's performance. This can be explained by the strong voluntary adoption of the audit committee following the publication of the Viénot Reports (Saada, 1998).

Relevance, Issues & Importance of Accounting Standards

Financial statements are prepared to summarize all business activities by an enterprise during an accounting period in monetary terms & report financial outcomes in terms of performance, status of assets, liabilities & flow of cash. These business activities vary from one enterprise to other on one hand and size & volume of business on the other hand. To compare the financial statements of various reporting enterprises poses some difficulties because of the divergence in the methods and principles adopted by these enterprises in preparing their financial statements. In order to make these methods and principles uniform, comparable, transparent, establish accountability and bring true & fair view of Financial Statement - Accounting Standards are evolved. This article discuss relevance, importance, applicability & content of Indian Accounting Standards till this date.