Why IFRS?
Even though some global companies in India are unsure whether to adopt IFRS (International Financial Reporting Standards) or not, they are aware that it could become a mandate in global reporting procedures in the near future.
There are many obvious benefits of IFRS, some of which include:
• Same accounting standards can be applied to all worldwide subsidiaries of a global company.
• A company’s performance can be easily measured with its global competitors.
• It will help in forging worldwide partnerships and alliances, as well as enable cross-border acquisitions and mergers.
• Consistent financial reporting across a global company.
• Easy access to all the worldwide stock exchanges.
• Practising a single standard vastly reduces cost to the company.
• It will enable better risk evaluations and assessment.
• Maintaining audit trails throughout a global company becomes easy.
• Having the same standard also cuts down the risks and issues that might otherwise crop up in a global company.
Challenges to Adopting IFRS
For any company, adopting a new standard across its subsidiaries can prove to be a humongous challenge. In addition:
• New standards introduces new discrepancies
• IFRS is still evolving and it might bring in new challenges
• There might be a requirement for multi-GAAP reporting as apart from IFRS, a company might also have to comply with other accounting policies and procedures
• Adopting a global standard across the company and its subsidiaries are never easy
How IT can help
The benefits of adopting IFRS outweigh the challenges posed by it. IT can definitely go a long way in smooth adoption of IFRS, and help in the creation of reporting tools and dashboards which can allow management to understand, track, monitor, control and report performances based on IFRS and whatever associated set of standards they choose. IT can also help in creation of databases to help out in maintaining audit trails and transparency, generate reports as required and respond to new challenges and requirements of IFRS and any other global standards and policies.
