IFRS and the need for convergence

Meaning of IFRS. IFRS are a single set of high-quality global accounting standards issued by the IASB (successor to the IASC). Like accounting standards generally, they codify the generally accepted accounting principles and lay down, as codes or guidelines, how transactions and events are recognised, measured, presented and disclosed, bringing uniformity and comparability to financial reporting. Beyond the question: India does not adopt IFRS word for word; it follows Ind AS, its own standards converged with IFRS: the ICAI, a member of the IASC, gives due consideration to international standards and integrates them "in the light of the conditions and practices prevailing in India".

Why convergence is needed.

1. Cross-border comparability. Capital, trade and ownership are increasingly global; without a common framework the statements of enterprises in different countries rest on different national GAAPs and cannot be meaningfully compared. Standards exist to harmonise diverse policies and bring comparability.
2. Access to global capital at lower cost, since investors and lenders can read a framework they already understand.
3. One reporting language for multinational groups, avoiding costly reconciliations between several national GAAPs.
4. Greater reliability and less manipulation, because a widely-accepted standard reduces the room to manipulate reported data, strengthening investor confidence.