The Institute of Chartered Accountants of India (ICAI) has constituted a group for implementing convergence with International Financial Reporting Standards (IFRS) in the country. The idea behind this move, among other things, is to approach the relevant legal and regulatory authorities for ensuring smooth convergence process, coordinate with the industry associations and for getting the industry ready for convergence, said Shanti Lal Daga, member central council, ICAI.

He said, it was decided recently to fully converge with IFRS from accounting periods commencing on or after 1st April, 2011, subject to its confirmation by government, regulators and other stakeholders. There are several challenges attached to this process. But we at ICAI have formed a group to aid smooth convergence to IFRS. The expert group would prepare a work plan for revising certain existing accounting standards (AS)s and issuing new ASs corresponding to IFRS prior to 2011 to be as near to IFRS as possible by the date of convergence, to look into the requirements of training to the members of ICAI and to consider any other aspect, such as, liaisoning with IASB (Internation Accounting Standards Board), where required, to settle conceptual issues, he explained.

Since the cost of compliance with IFRS would be very high for the SMEs industry, ICAI is also contemplating to have a separate standard for the industry segment. For this purpose, the proposed IFRS on SMEs will be examined to decide whether it may be adopted in toto or with appropriate modifications, he said. He pointed out that, IFRS issued by the IASB, are now increasingly being recognised as Global Reporting Standards. Presently, 105 countries require or permit the use of IFRS by various entities. 25 members of the European Union have already required adoption of IFRS from 2005.

Both Canada and Korea have indicated adoption of IFRS by 2011, while Brazil would do it from 2010. Our neighbouring country China is adopting IFRS within a year, he said, adding that USA is working with the IASB for convergence of US GAAP and IFRS. The idea is to permit non-US companies listed on the stock-exchanges in USA to file the financial statements prepared in accordance with the IFRS without requiring to prepare the reconciliation statement between IFRS and US GAAP.

Talking about the challenges in implementing IFRS, Daga said, accounting standard-setters in emerging economies are facing various challenges like non-compatible legal and regulatory environment, concerns over SMEs,economic environment, level of preparedness, alternative treatments, education needs of auditors, frequent changes to the IFRS and translation issues.

To overcome some of these challenges, IASB should look at things like coming out with separate IFRS on SMEs and preparing educational material on complex IFRS. Until the challenges are overcome, the accounting standard-setters in the emerging economies may have to introduce standards specific to respective needs by modifying IFRS