In May, IASB member Prabhakar Kalavacherla threatened India by telling a conference in Mumbai “to put it in one sentence, we strongly encourage adoption as against convergence,” suggesting that India could totally contribute to the rule-setting if it will just go ahead and adopt IFRS now. That sort of attitude is hilarious and why watching the IFRS “condorsement” plan getting burped up around the world is so much fun. Really? Adopt first, ask questions later?
India isn’t buying it, although looking to the U.S. and Japan for answers isn’t going to help matters either.
The government is planning to introduce additional changes to global accounting standard, IFRS, to make it more palatable for Indian companies, overriding the international opposition to amendments already made. Such a move will extend the eventual migration by Indian companies to the global standard and also insulate local firms from any short-term capital market shocks that may arise due to erosion in valuations.
However, any changes to the Indian version of the International Financial Reporting Standards (IFRS) will take time as the government will initially look at some of the revisions being suggested globally, specially by the developed markets of US and Japan, before finalising the road map, secretary, ministry of corporate affairs D K Mittal told ET on Thursday. “We have to see how IFRS will meet our requirements. Our markets are different, our standards are different,” he said.
Quote of the convergence! “Our markets are different, our standards are different.” I’m sorry, maybe I’m confused on how this convergence thing is supposed to work (entirely possible as I’m not an accountant and therefore not required to understand what’s happening here) but couldn’t each country getting IFRS shoved down its throat say the same? That’s why global economies are (read: were) such a beautiful thing; different markets breed different standards, and market participants have the option to say whether or not they find a particular country’s financial standards appealing. With forced adoption of a single arbitrary standard, determined by an entity with questionable self-interest at work, you take away investors’ ability to put their money where their mouth is.
GAAP has obviously failed. The evaporation of capital in the United States over the last 3 years proves it. But the whole Adopt-or-Else plan isn’t necessarily any better either.
In my humble opinion, it just makes the IASB look desperate and India look awesome. For now.