IFRS Convergence: Audit Season in India

April 10, 2014 Posted by India Briefing Reading Time: 3 minutes

The following is an excerpt from the April 2014 edition of India Briefing Magazine, titled “An Introduction to India’s Audit Process.”

While accounting standards in India differ slightly from the International Financial Reporting Standards (IFRS), Indian Accounting Standards (AS) are likely to converge with the IFRS in the foreseeable future. While a phased convergence of Indian Standards with the IFRS was initiated in April 2010 with a target date of April 2015 for full implementation, slow progress has led the Ministry of Corporate Affairs (MCA) to abandon this timeline in favor of a new roadmap for convergence that was announced last month.

The first phase of the new convergence process will likely require companies with a net worth of more than Rs10 billion (US$ 163 million) to transition to the IFRS from April 2015. This will be followed by companies with an annual turnover of between Rs5 and 10 billion (US$82 and 163 million) in April 2016. By converging AS with the IFRS, India will join the more than 100 countries that have already adopted or converged with the IFRS, and aim to improve investor confidence via increased transparency and comparability across firms and industries.

India’s eventual “convergence” with the IFRS will differ from “adoption” in that AS will be altered to conform with the IFRS rather than require full-fledged adoption of the standards outlined by the International Accounting Standards Board (IASB). This will preserve differing terminologies between the IFRS and AS while adding some new concepts and models such as the Acquisition Method in lieu of Purchase Method.

The chart below highlights key differences between the IFRS and current AS.

This article is an excerpt from the April 2014 edition of India Briefing Magazine, titled “An Introduction to India’s Audit Process.” In this edition of India Briefing Magazine, we provide readers with an overview of India’s annual audit process and offer important tips for the smooth navigation of the country’s audit regulations and accounting standards. We additionally outline key differences between the widely accepted IFRS and IAS protocols, and a number of key considerations FIEs should keep in mind to mitigate the risk of fraud of error in an organization.

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