India Stepping for IFRS: A Critical Review

Abstract

The Asian crisis of 1990, the US accounting scandals like that of Enron, World com, Adelphia, European scandals of Ahold  and the present economic crunch all have enforced the importance of effective corporate governance mechanism and global GAAP.  All these activities have forced the development of some universal reporting standards i.e. IFRS.  The benefits which Indian companies hope to reap after IFRS adoption are numerous.  But no benefits can be drawn without facing some crucial challenges.  The current shaken market confidence globally may present significant challenges to organizations.  Adoption of IFRS could result in an added considerable volatility in reported earnings and some performance specific measures like EPS and P/E Ratio.  Entities will have to clarify reasons for this IFRS related volatility apart from other macroeconomic factors.  This paper talks about some such challenges and impact of IFRS implementation in some sectors of the Indian economy.  The sectors mainly touched upon are that of retail, technology, telecom and power.  The paper closes with two small cases of JK Paper and Wipro who have gone for the adoption of IFRS.   The cases will aid in understanding the implementation issues of IFRS.