IFRS in India: Financial Implications

in Select Companies
Prashanta Athma* and O Bhavani**

International Financial Reporting Standards (IFRS) set by the International Accounting

Standards Board (IASB) are adopted by the companies for the preparation of the financial
statements. This ensures easy understanding and facilitates comparability of the financial
statements of different enterprises of different countries and provides relevant and
meaningful information to the various users of the financial statements. In India, the new
set of standards which have been converged with IFRS is known as Indian Accounting
Standards or Ind AS and will be implemented in India in a phased out manner (Phase
1, 2 and 3) as have been notified by the Ministry of Corporate Affairs on February 25,
2011. The recent announcement made by the Finance Minister in the year 2015 made
it mandatory for all the listed companies either to adopt IFRS or converge with effect from
the accounting year 2016-17. IFRS is recommended for adoption with several benefits in
mind and some of the companies have already adopted new standards and have started
reporting accordingly. In this context, the present paper presents an overview of double
adoption of IFRS globally by the significant trade forums and the Indian companies which
are voluntarily adopting IFRS. It also analyzes the financial implications of adoption of
IFRS by the select companies in India. The study is based on secondary data, and Gray
comparability index, t-test and F-test are employed for analyzing the data.

Introduction
Financial statements are prepared in monetary terms by an enterprise to summarize the end-
result of all the business activities during an accounting period. These business activities
vary from one enterprise to another. The divergence in the methods and principles adopted
by the enterprises in preparing their financial statements will pose difficulties if the financial
statements of various reporting enterprises are to be compared. Therefore, standards are
evolved, to make these methods and principles uniform and comparable, to the extent
possible.
Accounting standards are the statements of code of practice, of the regulatory accounting
bodies, that are to be observed in the preparation and presentation of the financial statements.
The basic objective of accounting standards is to remove the variations in the treatment of
several accounting aspects and to bring about standardization in presentation.

* Principal, University College for Women, Koti, Hyderabad, Telangana, India. E-mail: prashantaathma@gmail.com
** Assistant Professor (C), Department of Commerce, University College for Women, Koti, Hyderabad,
Telangana, India; and is the corresponding author. E-mail: bhavaniogirala@yahoo.com

© 2018
IFRS IUP. Financial
in India: All RightsImplications
Reserved. in Select Companies 7
 With globalization, the need to communicate across the borders has increased significantly.
The companies in one country are borrowing in the capital market of other countries
necessitating the use of the financial statements produced in one country by the other
countries for making investment and financing decisions.
International Financial Reporting Standards (IFRS) are set by the International Accounting
Standards Board (IASB) which aims at bringing uniformity in the preparation of the financial
statements to enable a comparison of different companies across the globe.
In India, new set of standards have been converged with IFRS known as Indian Accounting
Standards or Ind AS, which are to be implemented in a phased manner (Phase 1, 2 and 3) as
notified by The Ministry of Corporate Affairs on February 25, 2011. The recent announcement
made by the finance minister in the year 2015 made it mandatory for all the listed companies
either to adopt IFRS or converge with effect from the accounting year 2016-17.
IFRS is recommended for adoption with several benefits in mind and some of the
companies have already adopted new standards and have started reporting accordingly. In
this context, it becomes necessary to make an analysis of the adoption of IFRS across the
globe and in India, and also analyze the financial implications of adoption of IFRS by the
select companies in India.
The related literature points to the fact that, very few studies have been done on IFRS
and the studies are related mainly to the analysis of the problems and challenges in adoption
of IFRS, benefits to the stakeholders, requirements for successful implementation, and effects
on financial statements due to convergence. Therefore, the present study is undertaken to
present an overview of the adoption of IFRS globally and the implications of adoption of
IFRS on the financial results and financial ratios in the Indian context.

Literature Review
Shobana (2011) examines the effects of financial statement on convergence from Indian
Globally Acceptable Accounting Standards (IGAAP) to IFRS. The study concludes that the
IFRS are a fair valuation approach and are more transparent disclosures and IGAAP is relatively
conservative in their approach. Rakesh and Shilpa (2013) examine the relationship between
IFRS adoption and FDI and its effect on Indian economy.
Prasanna and Abhijit (2013) in their study propose a conceptual framework for analyzing
the effect of IFRS (with special reference to IFRS applicable to Indian Telecom Operators)
on certain financial aspects of business such as revenue recognition, property plant and
equipment, intangible assets, impairment of non-financial assets, outsourcing arrangements,
provisions and contingencies, inventory, and borrowing costs. Apurva (2013) in his study
shows the impact of convergence to IFRS on the financial position of the company. The
study also discusses the challenges faced by firms in the process of adoption of IFRS in India
and also ways through which these challenges can be addressed.
Kavitha et al. (2009) make an attempt to understand the benefits to the stakeholders by
adopting IFRS, and the challenges faced by India in adopting the same and the likely risks

8 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
in introducing IFRS. The study also analyzes the requirements for successful implementation
of IFRS in India. Suchita (2014) empirically studies the four most important areas of financial
activity, i.e., financial risks, investment activities, operating activities and debt covenants
and discusses the statistical significance of each area.
Achalapathi and Bhanu (2015) identify the statistically significant differences between
the IGAAP-based and IFRS-based financial statements of companies with the help of financial
ratios. Indiael (2015) explores and presents the extent of empirical research evidence on the
IFRS value relevance. Further, Preeti et al. (2015) focus on whether by following the converged
IFRS the primary objective of uniformity and comparability of the financial statements prepared
in India with the rest of the countries of the globe can be achieved or not.

Objective
The study aims to:

• Present an overview of adoption of IFRS globally by the significant trade forums.

• Present an overview of the Indian companies which are voluntarily adopting IFRS.

• Analyze the financial implications of adoption of IFRS in India by the select

companies.

Based on the objectives, the following hypotheses were framed:

H01: There is no significant difference in the profits of the select companies as per
IGAAP and IFRS.

H11: There is a significant difference in the profits of the select companies as per
IGAAP and IFRS.

H02: There is no significant difference in the financial ratios across the select companies
as per IGAAP and IFRS.

H12: There is a significant difference in the financial ratios across the select companies
as per IGAAP and IFRS.

Data and Methodology

Sources of Data
The study is based on secondary sources which includes database and reports of Ministry of
Corporate Affairs, Institute of Chartered Accountants of India (ICAI), International Accounting
Standards Board (IASB), United Nations Conference on Trade and Development, and World
Trade Organization (WTO). The period of the study is from 2011-12 to 2015-16. The first
phase of adoption of IFRS was supposed to be w.e.f. 2011-12, hence the starting year of the
sample period is 2011-12.

IFRS in India: Financial Implications in Select Companies 9

Sample Selection
The Ministry of Corporate Affairs has made it mandatory for NSE 50, BSE 30 and listed
companies with a turnover of 1,000 cr or more to adopt IFRS w.e.f. 2011-12 in the first
phase. However, only a few companies have adopted as the adoption of IFRS was postponed
to the year 2016-17. The study has therefore taken up all those companies which are listed
in NSE 50 and have adopted IFRS w.e.f. 2011-12. The study covers five companies, viz.,
Bharti Airtel, Dr. Reddy’s Labs, Wipro Ltd., Infosys and Tata Motors which have been listed
in NSE 50 and adopted IFRS since 2011-12.

Tools for Analysis

Gray Comparability Index was used to analyze if there is a difference in the profits in the
financial statements prepared as per IGAAP and IFRS. t-test was employed to test the
hypothesis as to whether there is any significant difference in the profits of the select
companies as per IGAAP and IFRS. And F-test was used to test the hypothesis as to whether
there is any significant difference in the financial ratios of the select companies as per
IGAAP and IFRS.

Results and Discussion

IFRS: Global Scenario
In the present global scenario, liberalization, privatization, and globalization are the keywords
that are driving businesses across the globe. Lack of trade barriers, the effective role of
WTO and the active participation of various countries in successfully overcoming the
geographical barriers to trade are the contributors to this phenomena. To mention a few
economies coming together at a rapid pace and the businesses going global would only
warrant for homogeneity in the preparation and presentation of financial data. Adoption of
IFRS is a step in this direction to bridge the gap existing due to inter-country reporting
standards in various countries. IFRS would ensure easy comparability and comprehensiveness
of the financial data.
In this context, it is proposed to present an overview of IFRS as adopted by various trade
forums, viz., Group of Twenty (G20), EU and BRICS globally.

IFRS: G20
The G20 is the premier international forum for cooperation on global economic governance.
The G20 includes 19 independent countries and EU. It accounts for 86% of the world
economy, 78% of global trade, and two-thirds of the world’s population as per WTO’s
report. Hence it is felt appropriate to analyze the G20 economies’ profiles and their stand
with regard to the adoption of IFRS.
The relevant authority in all of the G20 jurisdictions has made a public commitment to
IFRS as the single set of global accounting standards. All G20 countries have agreed in
principle for the adoption of IFRS as can be seen in Table 1. Out of these G20 countries,
11 member countries including EU have adopted or required IFRS for all or most of the

10 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
 Table 1: IFRS – G20 (As on August 31, 2016)
Adoption of IFRS
S. Name of the Committed to a Single Auditor’s Report Refers to Conformity
Listed Financial
No. Country Set of Global AS – IFRS All with IFRS Standards
Companies Institutions
1. Australia 3 3 3 3 3
2. Brazil 3 3 3 3 3
3. France 3 3 3 3 3
4. Germany 3 3 3 3 3
5. Italy 3 3 3 3 3
6. South Korea 3 3 3 3 3
7. Russia 3 3 3 3 3
8. South Africa 3 3 3 3 3
9. Turkey 3 3 3 3 3

IFRS in India: Financial Implications in Select Companies

10. United Kingdom 3 3 3 3 3
11. EU 3 3 3 3 3
12. Argentina 3 3 5 3 3
13. Mexico 3 3 5 3 3
14. Saudi Arabia 3 5 3 5 3
15. India 3 Permits IFRS Voluntarily 3
16. Japan 3 Permits IFRS Voluntarily 3
17. United States 3 Permits IFRS Voluntarily 3
18. Canada 3 For all publicly traded companies 3
19. China 3 Converged with IFRS Conformity with National Standards
20. Indonesia 3 Adopted National Standards that are substantially Conformity with National Standards
in line with IAS/IFRS
Source: Compiled from IASB Database

11
companies in their capital markets. Mexico and Argentina have excluded financial institutions
from adopting IFRS. However, Argentina is on its way to converge its accounting standards
applicable to banks with IFRS and they come into vogue with effect from January 1, 2018.
One noteworthy point here is that, India is one of the three countries along with Japan and
USA who have permitted IFRS on a limited voluntary basis for domestic companies and
foreign issuers. However, India has made it mandatory for all the listed companies to adopt
IFRS or converge with IFRS w.e.f. April 1, 2016. Saudi Arabia requires IFRS for banks and
insurance companies only, China has substantially converged its national standards to IFRS,
Indonesia has adopted national standards that are substantially in line with IAS and IFRS but
has not yet announced its plan for complete adoption.
The USA, one of the largest economies with the highest number of public trading
companies in its market has not yet given a green signal for the adoption of IFRS because of
huge costs involved in its conversion. Some of the researchers opined that US GAAP are
more rule-based while IFRS are principle-based and that US GAAP are of comparable standard
with IFRS. There is lack of clarity as to when the country would go in for adoption/convergence
of IFRS. The Japanese government announced the delay of a road map for IFRS adoption for
publicly traded companies due to potential costs to Japanese companies, already hard hit
from the 2011 earthquake and tsunami. The majority of Japanese companies do not issue
consolidated financial statements to the investing public. Accordingly, the optimal application
of IFRS in Japan would be to limit IFRS to those companies that publicly issue consolidated
financial statements. Mandatory adoption by 2015 has been abandoned by the Japanese
government and a final decision has not yet been made as to whether or when IFRS will be
adopted (Yamaji et al., 2011). Canada requires for all publicly traded companies.
All the G20 countries, except China and Indonesia require the auditors to give in their
report a reference with regard to the preparation and presentation of the financial statements
in accordance with IFRS.

IFRS: European Union

The EU is a unique economic and political union amongst 28 European countries that together
cover much of the continent. The EU is in prime position, being a biggest player on the
global trading and the largest exporter among the regional trade agreements over the past
20 years as per WTO’s report, representing 33% of the world trade.
One interesting feature worth mentioning here is that, the trade within the region has
accounted for more than 70% of the region’s total merchandize exports on average over the
last 20 years.
EU, one of the member countries in the G20 forum is in a strong position with a good
share in the global market, and has achieved the commendable position by acting together
with one voice on the global stage, rather than with 28 separate trade strategies. EU was one
of the first blocks to have agreed for adoption of IFRS as a single set of globally acceptable
accounting standards way back in 2002. Hence, there is a need to look into the adoption of

12 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
IFRS by EU to see if there are any variations existing in practice between G20 and EU in
terms of IFRS adoption/convergence.
All the listed companies of EU were required to prepare their financial statements
following IFRS from 2005 as a result of a regulation passed in 2002.
IFRS as adopted/followed by EU is presented in Table 2. It can be inferred from the table
that all the 28 member countries of EU are in consonance to adopt “IFRS as adopted by EU”
and for the same to be referred to in the auditor’s reports in verbatim.

Table 2: IFRS – European Union

IFRS as Auditor’s Report Refers IFRS Permitted in
S. Name of the
Adopted by to Compliance of IFRS
No. Country Consolidated Separate
the EU – As Adopted by EU
Statements Statements
1. Austria 3 3 3 5
2. Belgium 3 3 3 5
3. Bulgaria 3 3 3 3
4. Croatia 3 3 3 –
5. Cyprus 3 3 3 3
6. Czech Republic 3 3 3 3
7. Denmark 3 3 3 3
8. Estonia 3 3 3 3
9. Finland 3 3 3 3
10. France 3 3 3 5
11. Germany 3 3 3 3
12. Greece 3 3 3 3
13. Hungary 3 3 3 3
14. Ireland 3 3 3 3
15. Italy 3 3 3 3
16. Latvia 3 3 3 –
17. Lithuania 3 3 3 –
18. Malta 3 3 3 –
19. Slovakia 3 3 3 –
20. Netherlands 3 3 3 3
21. Spain 3 3 3 5
22. Sweden 3 3 3 5
23. United Kingdom 3 3 3 3

IFRS in India: Financial Implications in Select Companies 13

 Table 2 (Cont.)

IFRS as Auditor’s Report Refers IFRS Permitted in

S. Name of the
Adopted by to Compliance of IFRS Consolidated Separate
No. Country
the EU – As Adopted by EU Statements Statements
24. Portugal 3 3 3 3
25. Slovenia 3 3 3 –
26. Poland 3 3 3 3
27. Romania 3 3 3 3
28. Luxembourg 3 3 3 –
Source: Compiled from IASB Database

EU countries have the option to:

• Require or permit IFRS for unlisted companies.

• Require or permit IFRS in parent company (unconsolidated) financial statements.

All the EU countries permit IFRS in the consolidated statements of the listed companies
while about 16 countries permit IFRS in separate statements and five of them do not permit
IFRS for separate statements. Two countries, viz., Poland and Romania allow only for
companies applied for listing, while Portugal allows for companies that are within the scope
of consolidated group that uses IFRS. Two countries, viz., Cyprus and Slovakia requires
IFRS for all kinds of companies, Malta permits IFRS for all, UK requires IFRS for some and
permits for others, and Germany and Hungary also want statutory accounts that conform to
national GAAP. Most of these countries have required IFRS for banking/financial institutions.

EU countries in terms of inter trade share very interesting relationship with one another
contributing to a significant percent of the total world trade as per the WTO statistics. This
could also be one of the reasons apart from uniformity, comparability and transparency as to
why EU has voted for a set of global acceptable accounting standards. The compliance to
IFRS by the member countries of the EU only proves that the countries at large in the global
arena have understood the importance of global acceptable accounting standards.

IFRS: BRICS
BRICS, the collective economic power of Brazil, Russia, India, China, and South Africa
(South Africa joined the group in the year 2010), the major emerging economies together
account for more than 40% of the global population, nearly 30% of the land mass, and a
share in world GDP (in PPP terms) that increased from 16% in 2000 to nearly 23.1% and is
expected to rise significantly in the near future.
In the past few decades, these economies have acquired a vital role in the world economy
as producers of goods and services, receivers of capital and as potential consumer markets.
The BRICS economies have been identified as some of the fastest growing countries and the

14 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
engines of the global recovery process. They have shown an impressive growth increasing
their share in the world exports from 8% in 2000 to 19% in 2014 as per WTO report.
In the G20 countries’ forum, BRICS are playing a formidable role in shaping the
macroeconomic policy after the recent financial crisis. BRICS remained steady reflecting
the long-term view on the growth potentials of the BRICS and the soundness of their financial
systems.
BRICS, the member countries of G20 forum, have in unanimity committed to a single
set of global accounting standards (IFRS). Each of these countries adopted different approaches
in adopting IFRS. IFRS as adopted/followed by BRICS is presented in Table 3.
Of the five countries, Brazil and South Africa have adopted IFRS, China converged with
IFRS, India allowed voluntary adoption and Russia requires IFRS for the consolidated financial
statements. China and India are very fast developing economies with a very large market
base for consumer as well as capital goods. Five countries have exhibited different approaches
with regard to IFRS. This could be due to adoption or non-adoption of IFRS by trade partners
or countries within its geographical region.
These countries of G20, EU and BRICS are evincing keen interest in the adoption of
globally acceptable accounting standards for a better understanding of transparent reporting
practices so as to enjoy the fruits of barrier-less trade in the global markets.

IFRS: Indian Scenario

IFRS reporting is made mandatory in three phases by the Ministry of Corporate Affairs
(MCA). According to the Ministry, NSE Nifty 50, BSE Sensex 30, companies listed in overseas
stock exchanges and listed and unlisted companies with a net worth in excess of 1,000 cr
fall into Phase 1 and had to prepare their opening balance sheet on April 1, 2011 as per
IFRS. Phase 2 covers listed and unlisted companies with a net worth in excess of 500 cr but
not more than 1,000 cr and these companies had to prepare their opening balance sheet on
April 1, 2013 as per IFRS. In the third and final phase, listed entities with a net worth of
500 cr or less will be covered which have to prepare their balance sheet on April 1, 2014
as per IFRS.
In the year 2013, MCA has issued a circular superseding the previous guidelines on
implementation of IFRS/Ind AS postponing them until further official announcement.
In the year 2015, MCA announced that it will be mandatory for all listed companies with
a turnover of 500 cr and above with effect from April 2016. However, it was not adopted
and MCA has made it mandatory for all listed companies w.e.f. 2016-17 to adopt IFRS or Ind
AS.
There are 1,683 companies listed on NSE, and 5,789 companies listed on BSE as per
UNTCD Report (August 1, 2016). Only Nifty 50 and Sensex 30 companies are covered in
Phase 1. All Sensex 30 companies are listed in Nifty 50 covering 13 different sectors.
However, the companies in India have opposed implementation of IFRS on the grounds
that as IFRS is based on fair value or market value accounting it would lead to a lot of

IFRS in India: Financial Implications in Select Companies 15

 Table 3: IFRS – BRICS
Committed to a
Single Set of
Name of
Global Adoption of IFRS
the Country
Accounting
Standards/IFRS
Brazil 3 Adopted IFRS for all the
companies whose securities
are publicly traded and for
most financial institutions
whose securities are not
publicly traded.
Russia 3 IFRS required for the
consolidated financial
statements of all entities whose
securities are listed on stock
exchanges. And also for banks,
credit institutions, insurance
companies (other than
obligatory medical insurance),
non-governmental pension
funds, management companies
of investment and pension
funds and clearing houses.
India 3 Voluntary adoption by some
companies. Roadmap notified.
China 3 Adopted National Accounting
Standards that are substantially
converged with IFRS
South Africa 3 Adopted IFRS
Source: IASB Database
16 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
Other Points
From the year 2010 it is
mandatory for all listed
companies and financial
institutions to use IFRS.
IFRS mandatory for
consolidated financial
statements. Standalone
financial statements for all
entities must be prepared using
RAS.
Option to listed entities having
subsidiaries to submit their
consolidated financial either in
accordance with accounting
standards as per Section
211(3C) of the Companies Act
or IFRS. Separate financial
results to the stock exchanges
should be in Indian GAAP.
Use of IFRS not permitted for
domestic companies. They
have to use Chinese
Accounting Standards for
Business Enterprises. The EU
Commission permits Chinese
issuers to use CAS when they
enter the EU market.
All companies who are trading
in public markets are required
to use IFRS.
volatility in financial reporting, and amendments have to be made under Companies Act,
1956 and accounting practices have to be evolved slowly as sudden change disturbs the
whole system.
The MCA under various constraints have delayed the adoption of IFRS, subsequently
made optional to the companies to either report their financial statements based on the
existing Ind AS or IFRS.
The companies listed in the NSE and BSE were supposed to adopt IFRS under Phase 1
w.e.f. April 2011. However, of the 50 companies for whom IFRS was mandatory in the first
phase, only five companies, viz., Bharti Airtel Ltd., Dr. Reddy’s Laboratories Ltd., Infosys
Ltd., Wipro Ltd., and Tata Motors have reported as per IFRS, and other five companies
though they did not make it in Nifty 50/Sensex 30 have adopted IFRS because of their
presence in the global markets.
The list of the companies that have adopted IFRS is presented in Table 4. It is observed
from the table that 10 companies in India, have voluntarily adopted IFRS. Out of 10
companies, five were listed and five were not listed in both NSE 50 and BSE 30 and belong
to five different sectors (Bharti Airtel Ltd., Dr. Reddy’s Laboratories Ltd., Infosys Ltd., Wipro
Ltd. and Tata Motors). These companies have adopted IFRS for consolidated financial statements
because of their presence in the global/European markets.

Table 4: IFRS in Indian Companies

S.
Name of the Company Sector NSE 50 BSE 30
No.
1. Bharti Airtel Ltd. Telecommunications 3 3
2. Dabur India Ltd. Pharmaceuticals X X
3. Dr. Reddy’s Laboratories Ltd. Pharmaceuticals 3 3
4. Glenmark Pharmaceuticals Ltd. Pharmaceuticals 5 X
5. Infosys Ltd. IT 3 3
6. Rolta India Ltd. IT 5 5
7. Sify Technologies Ltd. IT 5 5
8. Wipro Ltd. IT 3 3
9. Tata Motors Automobiles 3 3
10. Noida Toll Bridge Co. Ltd. Infrastructure 5 5
Source: Compiled from Annual Reports

The study covers only Nifty 50 companies which have adopted IFRS. The impact of the
adoption of IFRS on the profits of these five companies is presented in Table 5.
Average profits after tax for five years (2011-12 to 2015-16) for all the five companies is
calculated on the basis of the information presented in the consolidated financial statements
prepared separately by the respective companies as per IGAAP and IFRS.

IFRS in India: Financial Implications in Select Companies 17

18
Table 5: Impact of IFRS on Profits
Profits After Tax
Year Bharti Airtel Ltd. Dr. Reddy’s Labs Infosys Wipro Ltd. Tata Motors
IGAAP IFRS IGAAP IFRS IGAAP IFRS IGAAP IFRS IGAAP IFRS
2011-12 57,300 42,581 13,009 14,262 8,470 8,316 52,924 53,321 114035 114,817
2012-13 50,965 22,669 15,268 16,776 9,429 9,421 61,823 66,696 88,671 89,556.7
2013-14 66,002 30,194 19,632 21,512 10,656 10,648 79,909 78,405 130,717 131,178.6
2014-15 50,531 53,083 23,364 22,179 12,372 12,329 87,140 87,059 128,291 129,082.4
2015-16 54,305 61,337 21,514 20,013 13,678 13,491 90,089 89,414 95,883 96,872.2
Total 279,103 209,864 92,787 94,742 54,605 54,205 371,885 374,895 557,597 561,506.9
Average 55,820.6 41,972.8 18,557.4 18,948.2 10,921 10,841 74,377 74,979 111,519.4 112,301.38
Gray CI 0.75 1.02 0.99 1.01 1.007
t-value = 0.09223; p-value = 0.464391 (The result is not significant).
Source: Compiled from Annual Reports

Table 6: Impact of IFRS on Ratios

Average Ratios
p-Value
Ratio Wipro Ltd. Bharti Airtel Ltd. Dr. Reddy’s Labs Infosys Tata Motors
IGAAP IFRS CI IGAAP IFRS CI IGAAP IFRS CI IGAAP IFRS CI IGAAP IFRS CI

EBIT M 7.44 7.33 0.98 34.00 33.05 0.97 17.45 17.14 0.98 28.68 29.04 1.01 9.028 8.74 0.96 0.972894
GP Ratio 30.68 31.96 1.04 18.79 19.52 1.03 56.36 56.61 1.00 37.99 36.28 0.95 37.47 35.10 0.93 0.967043
NP Ratio 17.28 17.40 1.00 4.41 4.90 1.11 14.67 14.70 1.00 22.76 22.78 1.00 4.92 5.15 1.04 0.972484
Debt Equity 35.37 36.80 1.04 13.52 12.44 .92 86.79 87 .86 1.01 26.63 25.22 0.94 83.2 83.40 1.00 0.998493
EPS 30.22 30.19 0.99 9.31 10.18 1.09 109.0 111.41 1.02 118.73 118.68 0.99 38.668 34.2 0.88 0.993778
Source: Compiled from Annual Reports

The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
 The comparability index of financial statements of select companies is computed based
on the average profits after tax as per Indian GAAP and IFRS. The index is calculated to see
whether there is any change in the profits in case of consolidated statements prepared as per
IFRS as compared to IGAAP.

Average Profits as p er IGAAP  Average Profits as p er IFRS

Comparabil ity Index  1 
Average Profits as p er IGAAP

It is evident from the index values that in the case of Dr. Reddy’s Labs, Wipro Ltd. and
Tata Motors, CI is slightly higher than 1 (1.02, 1.01 and 1.007, respectively) indicating a
nominal increase in profits as per IFRS, a favorable impact. Whereas, in case of Bharti Airtel
and Infosys, CI is lower than 1 (0.75 and 0.99 respectively) indicating an unfavorable impact
on profits by adoption of IFRS. However, t-test is conducted to see if the difference in the
profits computed as per IGAAP and IFRS is significant or not.
The p-value as per t-test at 5% significance level is 0.464391 indicating that there is no
significant difference in the profits of the select companies as per IGAAP and IFRS.
Profit, a single figure may not give meaningful inferences, therefore, ratios related to
profits have been calculated and presented in Table 6.
Profitability and efficiency ratios such as Earnings Before Interest and Taxes Margin
(EBIT), gross profit ratio, net profit ratio, debt-equity ratio and Earnings Per Share (EPS) are
calculated for measuring the impact of IFRS on the financial performance of the select
companies. The average of ratios for five years (2011-12 to 2015-16) for all the five parameters
for all the five companies is calculated on the basis of the information presented in the
consolidated financial statements prepared separately by the respective companies as per
IGAAP and IFRS.
The comparability index of ratios of select companies is computed based on the average
ratios as per Indian GAAP and IFRS. The comparability index is calculated to see whether
there is any change in the average ratios in case of consolidated statements prepared as per
IFRS as compared to IGAAP.

Average Ra tio as per IGAAP  Average R atio as pe r IFRS

Comparabil ity Index  1 
Average Ra tio as per IGAAP

It is seen from Table 6 that the index values relating to debt-equity ratio and gross profit
ratio in case of Wipro, EPS, gross profit ratio and net profit ratio in case of Airtel, debt-equity
and EPS in case of Dr. Reddy’s Labs, EBIT in case of Infosys, and net profit ratio in case of
Tata Motors, are slightly higher than 1, indicating a favorable impact of IFRS. Whereas in
case of 11 ratios calculated across five companies, CI is lower than 1 indicating an unfavorable
impact on the ratios by adoption of IFRS. Five different ratios such as net profit ratio for
Wipro, gross profit ratio and net profit ratio in case of Dr. Reddy Labs, net profit ratio in case
of Infosys, and debt-equity in case of Tata Motors have not recorded any change between
IGAAP and IFRS.

IFRS in India: Financial Implications in Select Companies 19

 However, F-test is conducted to see if there is any significant difference in the ratios
between IGAAP and IFRS. The p-values for F-test at 5% significance level is >0.05 indicating
that there is no significant difference in the financial ratios of the select companies as per
Indian GAAP and IFRS.

Conclusion
IFRS in India has been an issue of debate and discussion for several years. It has also come
a long way from supposed implementation/adoption in the year 2011 to its postponement.
Addressing various challenges, MCA has made an announcement that it is going to be
mandatory for the business world to move on lines with its recent notification on mandatory
implementation of IFRS/Ind AS w.e.f. the accounting year 2016-17. In this context, the
present paper made an attempt to analyze the adoption of IFRS across the globe as well as
in India and also focused on the financial implications of adoption of IFRS by the select
companies in India.
The main findings of the study are summarized as follows:
• All the countries in the G20 Forum have made a public commitment to adopt
IFRS as a single set of global accounting standards.
• 11 member countries including EU have adopted or required IFRS for all or most
of the companies in their capital markets.
• India, USA and Japan have only permitted IFRS standards on a limited voluntary
basis for domestic companies and foreign issuers.
• India has made it mandatory for all the listed companies to adopt IFRS w.e.f.
April 1, 2016.
• USA, one of the largest economies with a highest number of public trading companies
in its market, has not yet given a green signal for the adoption of IFRS because of
huge costs involved in its conversion.
• The member countries of BRICS have adopted a different approach towards adoption
of IFRS.
• In India, 10 companies have voluntarily adopted IFRS. Out of the 10 companies,
five are listed on both NSE 50 and BSE 30, while the remaining five companies
covering five different sectors are not listed on either NSE 50 or BSE 30.
• The results of t-test indicate that there is no significant difference in the profits of
the select companies as per IGAAP and IFRS.
• The results of F-test reveal that there is no significant difference in the financial
ratios of the select companies as per Indian GAAP and IFRS.

Suggestions
Based on the results of the study, the following are suggested:

20 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
 • For successful implementation of the said task, it is necessary that there should be
a joint effort by government, regulatory authorities, standard setting body, users
and the accounting professionals.
• The companies are likely to incur certain costs on transition to IFRS such as one-
time implementation costs including the training of the accountants, updation/
upgradation of IT systems and information management systems, increased audit
cost, etc. Therefore, the companies should be prepared to bear the cost as the
benefits outweigh the costs.
• The companies should be mentally prepared and change the formats of accounts,
and accounting policies accordingly and follow an extensive disclosure practices.
• The transition is a Herculean task which warrants for a detailed and methodical
framework in planning, formulating and executing the appropriate strategies across
the organizations. Nevertheless, if the transition is planned and managed properly,
it will be a positive step for financial reporting in India.
• Taking into account the broader perspective of increasing global marketplace and
comparability across the nations, it is very essential for the companies to adopt
IFRS not only for the effective allocation of scarce resources but also for taking
effective decisions.
To achieve international comparability, the key nations around the world have already
committed to the one global set of accounting standards. While over 114 countries (IASB
Database) have already adopted IFRS, other countries like India are moving in the direction
of implementation for reaping the long-term benefits of uniform globally comparable
accounting standards.

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Reference # 09J-2018-01-01-01

22 The IUP Journal of Accounting Research & Audit Practices, Vol. XVII, No. 1, 2018
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