What Is IFRS & Why It Matters for Indian CAs in 2025
What Is IFRS?
IFRS, or International Financial Reporting Standards, refers to a set of accounting principles developed by the International Accounting Standards Board (IASB) under the governance of the IFRS Foundation. These standards are designed to bring consistency, transparency, and comparability to financial statements across the globe.
Originating from Europe, these standards have now been adopted in over 140 jurisdictions worldwide. The goal is to create a universal financial language that helps businesses, investors, and regulators understand and compare financial reports across borders.
In essence, IFRS moves away from rigid rule-based accounting (like US GAAP) to a more flexible principles-based framework, allowing better representation of economic reality in financial statements.
Why IFRS Matters Globally & in India
Globally, IFRS enhances transparency by standardizing accounting practices. It allows investors to compare apples to apples, no matter where a company operates. Whether it’s a German car manufacturer or an Indian tech firm, these standards enable stakeholders to interpret financial health on a common ground.
Why It’s Important for India
India has not adopted IFRS outright. Instead, it has taken a convergence approach through the implementation of Ind AS (Indian Accounting Standards). These standards are closely aligned with IFRS, with specific adjustments (called carve-outs) to suit India’s regulatory and economic environment.
This alignment serves two key purposes:
Supports Indian companies looking to expand globally
Improves investor confidence, especially among foreign investors
IFRS vs GAAP
| Feature | IFRS | US GAAP |
|---|---|---|
| Nature | Principles-based | Rules-based |
| Inventory Valuation | LIFO not allowed | LIFO allowed |
| Development Costs | Capitalized in some cases | Typically expensed |
| Revaluation of Assets | Permitted | Rarely permitted |
Ind AS vs IFRS
India’s Ind AS framework is substantially converged with IFRS but differs in key areas to reflect local laws and business practices.
Examples of Ind AS carve-outs:
Some fair value options under IFRS are restricted in Ind AS
Differences in the classification of financial instruments
Sector-specific exemptions (especially for insurance and banking)
These changes ensure IFRS principles work within India’s legal framework while keeping global comparability intact.
Ind AS Implementation Timeline in India
India began its convergence journey in 2016, rolling out Ind AS in phases:
Phase I:
FY 2016–17
Applicable to companies listed or unlisted with net worth ≥ ₹500 crore
Phase II:
FY 2017–18
Applies to other companies with net worth between ₹250–500 crore
Also applies to listed companies not covered under Phase I
Sector-Specific Implementation:
Banks, NBFCs, and insurance companies had their own tailored roadmaps:
NBFCs: Ind AS mandatory from FY 2018–19 (with ₹500 crore+ net worth)
Insurance companies: Delayed due to IRDAI guidance; still under staged alignment
This phased approach helped manage the significant training and system overhauls required.
Benefits & Challenges of Convergence in India
Benefits:
Enhanced global comparability of financial reports
Increased investor confidence from international stakeholders
Simplified cross-border M&A and financing opportunities
Better corporate governance and disclosure quality
Challenges:
High implementation costs, especially for smaller firms
Need for widespread training and upskilling
System overhauls for ERP and accounting platforms
Difficulty in interpreting principles-based standards for tax and audit purposes
Despite these challenges, the overall consensus is that IFRS convergence strengthens India’s financial reporting landscape in the long run.
Conclusion
IFRS plays a critical role in making Indian financial reporting more transparent, comparable, and globally aligned. Though India follows Ind AS, the convergence ensures our accounting ecosystem stays relevant on the world stage.