IFRS: need and benefit

Meaning. International Financial Reporting Standards (IFRS) are a single set of high-quality global accounting standards issued by the IASB (successor to the IASC), prescribing how transactions and events are recognised, measured, presented and disclosed. Like other accounting standards, they codify generally accepted accounting principles and lay down norms for how items are dealt with in the financial statements. India does not adopt IFRS verbatim but follows Ind AS, its standards converged with IFRS: the ICAI, as 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".

Need for IFRS. Businesses, investors and lenders increasingly operate across borders; without a common framework the financial statements of enterprises in different countries are prepared on different national GAAPs and cannot be compared. A common set of standards is needed to harmonise the diverse accounting policies and practices in use.

Benefits of IFRS.

1. Comparability: statements of enterprises across countries and periods become comparable, since standards bring uniformity of assumptions, rules and policies and reduce misleading conclusions.
2. Access to global capital at lower cost, because investors can read a globally understood framework.
3. Single reporting framework for cross-border groups, avoiding multiple-GAAP reconciliations.
4. Reduced scope for manipulation, as a good standard significantly reduces the room to manipulate reported data.