Consequences and determinants of IFRS convergence in India

Abstract

Purpose The purpose of this paper is to provide evidence of how convergence to International Financial Reporting Standards (IFRS) impacts accounting values and the determinants of variation in equity adjustments among Indian companies. Design/methodology/approach Using a sample of 323 listed companies, the authors empirically test whether there is a significant difference between converged IFRS (Ind.AS) and Indian Generally Accepted Accounting Principles (GAAP) (AS) reported figures and ratios and why companies adjust differently. Findings This paper reveals that fair valuation under Ind.AS causes a significant decrease in goodwill. A substantial decrease in both current and long-term liabilities because of non-recognition of proposed dividend, discounting of long-term provision per Ind.AS was also found. The variations in equity adjustment were significantly influenced by capital structure, level of family control and auditor type. Practical implications This paper provides insights to users who are interested in historical data, that Ind.AS brings significant changes in the accounting values and ratios and the impact differs among companies based on capital structure, ownership and auditor type. Originality/value This paper contributes to the literature of IFRS convergence in India by providing rational analysis of the differences between IFRS, Indian converged GAAP and Indian local GAAP among companies and its impact on accounting values.

Convergence to IFRS: a comparative analysis of accounting standards in India

“…Additionally, there is a high level of promoter ownership in most Indian companies. These business structures differ from settings of prior studies, which are mostly Tawiah, V (2020). International Journal Accounting, Auditing and Performance Evaluation (forthcoming)…”

“…Example of such differences are the presentation of gains on a business combination (IFRS 3 vs Ind.AS 103) and discounting of employee benefit obligation (IAS 19 vs Ind.AS 19). And some of these standards are found to create a difference is the reported figures of IFRS and Ind.AS (see Tawiah and Boolaky 2020).…”

“…Kautilya used permutations and combination, to developed accounting rules for the preparation of income statements and budgets as well as performing independent audit (Sihag, 2004). These rules were mainly addition and subtraction of figures which is similar to the single entry of present-day accounting reporting (Tawiah and Boolaky 2020). Due to the dominance of the public sector at the time, the rules on primarily for preparation and presentation of government business activities.…”

“…At best, some state and empire tried to develop laws that suit the people of the state. Despite the formation of the ICAI in 1949, it had no legal power for setting accounting standards (Tawiah and Boolaky 2020).…”

IAS/IFRS in Jordan: Adoption, Implementation and Determinants

“…Most of the prior studies focused on examining the adoption consequences of accounting standards [e.g. [7][8][9][10][11] and ignored the level and determinants of such adoption. Accordingly, it is rational to argue that there is some doubt in the adoption level of such standards among Jordanian companies.…”