Reflections on implementation of international financial reporting standards (IFRS) in the Indian banking industry

Abstract

The purpose of this article is to study the preparedness of the Indian financial system to adopt the "International Financial Reporting Standard" (IFRS). IFRS, which is enunciated by the International Accounting Standards Board (IASB), describes how corporations have to manage their accounts and report on them. Created to establish a common accounting language, the goal of IFRS is to make financial statements consistent and uniform throughout the globe and across different industries in varying business environments. Although the study covers the implications of IFRS on various segments of commercial activities carried on in India, its focus was concentrated on the country's banking system. India has a multi-layered banking system which is predominantly owned by the government. With a history of more than 100 years, the Indian banks are the oldest of all the entities engaged in the business of financial intermediation in the country. No other sector of the Indian economy can match the contributions made by the Indian banks to the economic development of the nation. In the process of conducting the study, efforts have been made to examine and analyze the possible effects of those prescribed financial standards of IFRS which will substantially alter the hitherto followed accounting and reporting practices of the banks in India and its implications on the various stakeholders of the Indian banking system. The convergence of the Indian Financial Reporting Standards - the IND AS - with the International Financial Reporting Standards - IFRS - has not been a smooth sailing transition, despite the best efforts of the Reserve Bank of India, which is the regulator in the Indian banking industry as the country's central bank.