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Globalisation of accounting standards and competitive posture of Indian companies

Author

Listed:
  • Monica Singhania

    (Faculty of Management Studies, University of Delhi, New Delhi-110007, India)

  • P. K. Gupta

    (Centre for Management Studies, JMI University, New Delhi-110025, India)

Abstract

Unification of the global financial reporting system is essential to enable comparability of financial statements at the international level in post crisis competitive environment. IFRSs are increasingly gaining acceptance as global accounting standards. With European Union adopting the IFRS in 2005, as on date over 116 countries have already either converged their accounting standards with IFRS or adopted IFRS as such and many more are in the process. Countries refusing IFRS are likely to be viewed as more risky by the international investors thereby affecting the inflow of capital to such countries. In India, the Institute of Chartered Accountants of India (ICAI) the apex body dealing with accounting standards has declared the roadmap of IFRS convergence in a phased manner from April 1, 2011. Our paper highlights the status of Indian accounting standards converging to IFRS as of now. In addition, a full fledged theoretical framework is developed showcasing, the convergence timeline, the major differences in the treatment of select items under these two alternative accounting environments, exact stage at which the Indian accounting standards are today in view of the announced convergence to IFRS and the legal and regulatory issues in converging to IFRS in India. We investigate the case of 150 odd firms and show the impact of convergence on financial ratios and the related valuation concerns. Finally, we indicate the strategic implications of IFRS adoption to Indian companies.

Suggested Citation

  • Monica Singhania & P. K. Gupta, 2011. "Globalisation of accounting standards and competitive posture of Indian companies," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 59(2), pages 279-290.
    • Handle: RePEc:mup:actaun:actaun_2011059020279
    DOI: 10.11118/actaun201159020279
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    References listed on IDEAS

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    1. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 467-498, June.
    2. Anne B. Fosbre & Ellen M. Kraft & Paul B. Fosbre, 2009. "The Globalization Of Accounting Standards : Ifrs Versus Us Gaap," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 3(1), pages 61-71.
    3. Hollis Ashbaugh & Morton Pincus, 2001. "Domestic Accounting Standards, International Accounting Standards, and the Predictability of Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 39(3), pages 417-434, December.
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