The financial reporting and regulatory landscape for businesses and corporations in India have undergone a paradigm shift due to the convergence of IFRS and Indian Accounting Standards. Indian Accounting Standards are referred to as Ind AS. Every firm with an Indian registration must follow the accounting rules for financial reporting.

Although many professionals support the implementation of IFRS, countries encounter numerous difficulties, which is where accounting services in India come into play. The proper convergence of IFRS with Indian accounting standards will pose several obstacles and issues, including a lack of infrastructure, inadequate training, a shortage of IFRS professionals with relevant experience, excessive relocation expenses, altered norms, and regulations, etc.

Important obstacles to IFRS implementation

Despite the many advantages of IFRS, there have been reports of implementation difficulties in India, which are mentioned below:

Corporation tax

The structure and procedures for creating financial statements will change due to the implementation of IFRS, which will inevitably alter the tax liability. Since the tax authority employs Tax Accounting Standards for taxation, there has been no change in Indian tax legislation with adopting IFRS in India. However, there have been sufficient adjustments to acknowledge the convergence of Indian Accounting Standards with IFRS. For Indian officials, a full overhaul of the tax system will present significant difficulties.

Fair value estimation

When evaluating the specifics in the financial statements, IFRS considers the fair value measurement. Indian businesses have long used the Indian GAAP to prepare their financial statements (Generally Accepted Accounting Principles). Financial statements would become subjective and volatile if a fair value measurement system were used. The cost of financial reporting would rise due to hiring valuation specialists from Accounting Services in India.

Infrastructure for IT

A significant amount of money would need to be invested in IT infrastructure for businesses due to a comprehensive redesign of the financial accounting tools and software used for financial reporting. Since changing the infrastructure for financial reporting would be more expensive, time-consuming, and labor-intensive, businesses would be reluctant to do so. This constrains small businesses.

Knowledge and instruction

The Indian corporate sector now uses International Financial Reporting Standards and new accounting concepts. There aren’t enough IFRS training centers or academic programs. According to recent observations, India now lacks qualified personnel who can adopt IFRS. To ensure the adoption of IFRS smoothly, regulators must conduct training programs and awareness campaigns. Investors, businesses, stock exchanges, banks, and other stakeholders must be aware of financial reporting standards.

Small and medium-sized enterprises

The Small and Medium Enterprise sector cannot be disregarded because of their significant presence in India relative to other nations and because they are crucial to economic growth. Implementing IFRS in India is exacerbated by the lack of resources and accounting expertise in the MSE Sector.

Regulatory obstructions

The Companies Act of 1956, the SEBI Act of 1992[1], the Income Tax Act of 1961, the Foreign Exchange Management Act of 1999, and the Indian GAAP make up most of the regulatory framework governing Indian accounting standards. Some current legislation, such as the SEBI Regulations and RBI Regulations, also provides guidelines for producing and reporting financial statements. A professional must adhere to the full International Financial Reporting Standards in letter and spirit under IFRS because there is no role for overriding legislation in financial reporting. The above laws are the biggest obstacle to the convergence of Indian Accounting Standards with IFRS. It is necessary to modify current laws to comply with IFRS to lessen the difficulties associated with implementing IFRS in India.

Conclusion

Implementing the IFRS-converged Indian Accounting Standards is the responsibility of RBI and IRDAI (Ind AS). The credibility of Indian enterprises abroad and their access to the global financial system to raise financing will unquestionably grow due to IRFS compliance. In addition, IFRS has advantages, including timely financial information for decision-making, easier comparison of financial statements, improved access to the capital market, and uniform and transparent reporting, which, in a nutshell, exceed the disadvantages.

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