The march towards a global set of accounting and reporting standards has been underway for a number of years with Europe, most of Asia and other countries adopting International Financial Reporting Standards (IFRS). While moving to IFRS will make life easier for analysts and investors in comparing and analyzing the financial health of global companies, the transition will cause challenges for accounting and finance staff who must report results in local GAAP and IFRS during the transition period. This article highlights a four-phased approach and key technologies that will ensure a successful transition to IFRS.

IFRS: “Coming to India”

IFRS has already been widely accepted as a global accounting standard around the world; European countries and Australia have already adopted it as their official standard in 2005. The U.S. is also going through the process of changing its domestic accounting standards based on IFRS requirements. In India, the Institute of Chartered Accounts of India (ICAI) and Ministry of Corporate Affairs (MCA) have set a phase-wise deadline for Indian companies to converge with IFRS.

In the first phase, all companies listed on NSE and BSE, those with networth of Rs 1000 crores and which are listed overseas have to be IFRS compliant by 1^st April 2011. The first IFRS reporting period for entities in India having accounting period beginning on April 1 would be April 1, 2011, to June 30, 2011. For an entity whose accounting period begins on January 1 the first IFRS reporting period would be January 1 to March 31, 2012. It waits to be seen how many organisations in India have acquired IFRS compliance.

Recently in March 2010, the government announced an extension of two years for banks and non-banking finance companies to align their accounting practices with the international financial reporting standards. These include insurance companies, mutual funds etc. Experts believe this extension was necessary so these organisations can prepare their software to enable the convergence. Regional rural banks and urban co-operative banks with networth lower than Rs 200 crores have been allowed to follow the current accounting standards, given their low exposure to international markets.

There is a growing need for interpretation of IFRS and the effect of this convergence to auditors, preparers and interpreters of financial statements.

It is important for Indian companies to fully think through the implication of IFRS system implementation. In order to develop an effective system with less than two years, one of the best options would be to introduce a solution that has been fully validated overseas.

Oracle has one of the most widely used IFRS solutions around the world. Oracle’s IFRS solution fully satisfies all aspects of the requirements including subsidiaries, financial data quality management & evaluation and consolidated disclosure. Oracle’s solution enables companies to maintain existing processes as much as possible and to implement IFRS policies with consistency based on its integrated platform.