Convergence to IFRS is not just an accounting exercise, but has enterprise wide impact. Starting from the presentation of the statements, classification of the information in the statements to the way business is run, IFRS would have an impact. Accounting statements are presented at Fair Value. Hence there would be changes in revenues, profits, assets and liabilities. At the time of adoption of IFRS there are options and exemptions available. A judicious election is required as these have impact on the organization continuously
Businesses would have to reformulate their strategies in terms of mergers, acquisitions or investments.
Accounting ratios would change and consequently the debt covenants as well as capacity to borrow would change.
Principle based accounting will require changes in corporate governance and risk management strategies.
Stakeholder’s perception of the entity would change. Share price, Taxation, Employee benefits structure would change.
Business management including Management Information System and the back office would change.
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i think nothing will be changed except transparency in financial statements. IFRS has no relevance with management decision making using certain tools. Yes it may imapct in the minds of stakeholders to compare for their investment as all Financial statments will be standardised in IFRS environment to compare financial results and theoretical fair value of business.
ReplyDeleteTill now no model has been made in the history to change the real situations of company. So management can manipulate the numbers like sathyam co. made recently to tap the mark
That is not necessarily true Amulya. We have done this exercise many times over and every time we could notice change in every item of Balance sheet viz Indian GAAP. I am not that sure viz US GAAP. But definitely conversion effects things like borrowing ability etc....
ReplyDeletei quite agree with ur reply. Much benefits will come like audit report transparency where general stakeholders were confused about auditors qualification marks etc. Now in short they will know yes FS complied with IFRS or not fully so definitely it may effect borrowing capacity while analysing company's creditworthiness,transparency in FS etc. But still i feel during M&A, common sense with rich experience will supersede IFRS complied FS in taking decisions...
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