Ind-AS Enforcement in India: An Assessment of Readiness,Benefits and Key Challenges

Abstract

This study endeavours to recognize the preparedness, advantages and pitfalls associated with International Financial Reporting Standards (IFRS) enforcement in India. The data have been complied using purposive sampling technique from 75 accounting individuals from diverse corporate sectors of India, and the research findings of the article convey that the whole accounting community is extremely positive about the advantages related to IFRS enforcement, but they too considered challenges a major roadblock towards smooth implementation. There are few studies available reporting the readiness towards this high-quality international accounting standards in India, which intrigued the authors to evaluate the readiness level in the country regarding IFRS-based Ind-AS. The current accounting system in India calls for extensive training in terms of IFRS technicalities, seminars and workshops on a large scale should be embarked upon by all educational institutions, accounting regulatory bodies, accounting professional organizations such as ICAI, KPMG and other accounting experts to impart and share knowledge about IFRS for a smooth enforcement of IFRS.

Keywords

Ind-As Ind-AS challenges benefits of Ind-AS readiness for Ind-As India

Introduction

The financial reporting world has endorsed a universal language due to rapid changes in economy. According to Chand et al. (2008) and Tyrrall et al. (2007), the financial boundaries among countries have vanished gradually due to liberal economic, trade, political policies across the globe, the advancements and upgradation in technology, enhanced international fund flow and the influence of multinational companies. Crawford et al. (2013) stated in his report that the shift from rule-based accounting system to International Financial Reporting Standards (IFRS) is required to boost transparency, trustworthiness, relevance of accounting information and internationalization of nations. Thus, the whole process of convergence of accounting standards was initiated in early 2001 with an aim to bring limpidity and standardization of the standards. As a result, from 2005, developed economies such as Australia (since 2007), Canada (since 2011), Europe and the European Union (EU) began adopting mandatory IFRS in their respective countries.

Currently, around 140 countries allow IFRS adoption for local indexed companies, although only 90 nations have completely enforced the IFRS. Kim and Shi (2012a, 2012b) concluded in their research that better reporting quality can be produced by the companies that use IFRS than those that use local/domestic accounting standards.

Due to various benefits and challenger involved in IFRS enforcement, both the preparers (Accounting professionals, accountants, auditors, etc.) and users (management, investors, government, lenders, shareholders, etc.) have paid attention to IFRS adoption and implantation because of challenges and benefits associated with it. Ahmed et al. (2013), Barth et al. (2012), Brüggemann et al. (2013), Joshi et al. (2016), Rezaee et al. (2010) and Yip and Young (2012) stated in their research that the research emphasis has shifted from the IFRS issuance processes to understanding IFRS’ implementation advantages and pitfalls. India announced the road map for adoption of the Indian Accounting Standards (Ind-AS) from the financial year 2016–2017, and hence it is the most recent member in the IFRS adoption chain. The Ministry of Corporate Affairs (MCA), in 2015, proclaimed and devised a new course of action for the implementation of New Indian Accounting Standards (Ind-AS)—with effect from 1 April 2015–2016.

This article is a descriptive study, which is motivated to assess the extent of readiness, benefits and challenges associated with IFRS converged Ind-AS encountered by the accounting associations and members of the accounting bodies in India. The purpose of this article is to find out the extent of readiness towards IFRS-converged Ind-AS in India and assess the perceived advantages and pitfalls of IFRS-converged Ind-AS in India. The study contributes to the existing literature through its significant outcome that shows that the Indian accounting system is still not prepared for the shift towards IFRS-based Ind-AS. Though the officials are hopeful about the advantages of IFRS enforcement, they consider the cost associated with IFRS implementation as a major barrier.

The article is organized into the following sections. The second section explains the existing literature on IFRS and Ind-AS with respect to a similar subject. The third section explains the research methodology, and the fourth section elaborates on data analysis and interpretations. The fifth and final section focuses on findings and conclusion.

Review of Literature

According to Agostino and Drago (2011), the implementation of IFRS had an objective of reducing the information asymmetry and attracting more investors. IFRS enforcement is not mandatory, but due to its superior quality over other local accounting standards, more than 110 countries have either adopted IFRS or converged their local standards as per IFRS. Alali and Cao (2010) reported that the influence of harmonization of accounting rules is perceived to improve the quality of local as well as global financial reporting. International Accounting Standards Board (IASB) initiated the process of developing and implementing the global accounting standards, which has obtained widespread endorsement from various national accounting associations and international bodies. The factors for adoption of IFRS are evidenced and highlighted by many researchers, Barth et al. (2012), Cascino and Gassen (2014), Jeanjean and Stolowy (2008), Jones and Finley (2011), Lang et al. (2010), Schleicher et al. (2010) and Shil et al. (2009) conducted studies and reported reasons such as effect of experience, diversity in implementation and practice, complexity and adoption pitfalls as few factors impacting IFRS enforcement. Weaver and Woods (2015) also indicated that though a plethora of literature is available on the topic of international accounting harmonization, issues associated with implementation, such as the adoption cost, better understanding, training and IT, also require attention.

In the past, many studies conducted globally indicate that the enforcement of IFRS brings various implementation challenges. Ocheni (2015) conducted a study and reported that shareholders, including users and preparers, undergo implementation challenges such as employee training, poor infrastructure and reorganization of processes to meet future challenges in terms of numerous modifications in academic curriculum to equip the graduate’s abilities with shifts in accounting techniques and practices Jermakowicz (2004) listed few challenges such as lack of guidance and assistance during the enforcement of IFRS, complicated nature of some standards, the underdevelopment of capital market and the weak enforcement of laws and regulations for Belgian public-listed companies, and further added that the change in financial reporting system through the enforcement of IFRS would enhance the competitiveness and the growth of European companies. Many studies (Hail et al., 2010a,b; Wright & Hobbs, 2010) on IFRS emphasize on quantitative research associated to IFRS influence and implication issues like the economic results of IFRS enforcement for financial reporting and issues associates with IFRS convergence or conversion. Hail et al. (2010) endeavoured to assess the significance and convergence of IFRS in terms of its advantages to the relevant users of the financial information. Some studies in the past comprise studies on the consequences of IFRS on country-specific accounting practices. Studies conducted by Artikis et al. (2010) and Callao et al. (2009) and the significance of IFRS in diverse advanced and emerging economies such as in China conducted by Chen et al. (1999), South Asia by

Ali, (2006), Romania by Albu and Albu (2011), Germany by Haller et al. (2009), Greece by Artikis et al. (2010) and van Wyk and Rossouw (2009) endorsed IFRS convergence mechanism due to its benefits from the perspective of stakeholders, academicians and practitioners, etc. Barth et al. (2012), Brüggemann et al. (2013), Chen et al. (2014), Lang et al. (2010), Rezaee et al. (2010), Schleicher et al. (2010), Shima and Gordon (2011) and Yao and Koga (2009) published their research outcome associated with quality and implementation effectiveness of IFRS.

Apparently, this research finds diverse studies conducted in the past couple of years in China, highlighting numerous issues associated with IFRS enforcement (Peng & Smith, 2010; Ping, 2008; et al., 2014), enforcement of IFRS (Ding & Su, 2008; Wang et al., 2012), fair value measurement issues (Peng & Bewley, 2010; Zhang et al., 2012), earnings management (Cang et al., 2014; Kao, 2014; Zhang et al., 2013), etc., but the literature is limited for other Brazil, Russia, India and China (BRIC) nations like Brazil, India and Russia. In India, according to Dhankar and Gupta (2014), the Advisory Committee on Accounting Standards (NACAS) published a deferral in enforcing the Ind-AS, which were cited as the pending modifications and settlement of diverse regulatory and taxation issues in addition to pitfalls inherent in IFRS convergence mechanism such as awareness, training and cost of implementation. The central government has an accounting advisory body (NACAS) to advice on preparation and enforcement of accounting policies and standards. Perumpral et al. (2009) cited in his research that in India, the main significance of arranging its accounting rules with other countries has drawn attention since 1991 as a step to liberalize the Indian economy with an aim to attract foreign participation in technology, businesses and investment. Many Indian researchers (Adhana, 2015; Dhankar and Gupta, 2014; Dhankar et al., 2015; Kumar and Atwal, 2014; Mishra & Aggarwal, 2014) cited in their studies the significant announcement of MCA regarding the road map for implementation of Ind-AS, which conveyed the Government’s commitment towards enforcement of IFRS-converged Ind-AS. They also highlighted the implementation challenges in their studies such as understanding, interpretation, training, implementation cost, Internet technology infrastructure, etc., which are unanimously considered as major roadblocks.

Jermakowicz and Gornik-Tomaszewski (2006) alerted other countries with respect to IFRS enforcement. Haller and Wehrfritz (2013) stated that an organization clinging to both local generally accepted accounting principles (GAAP) and IFRS may encounter inferior state of disclosure. However, majority of researchers, users and practitioners endorse the enforcement of IFRS due its enormous benefits. According to Tokar (2005), and countries must converge their local GAAP as per IFRS to avail astronomical advantages for everyone. In additions, Joshi et al. (2008) tested the conceptions of auditing and accounting professionals regarding IFRS enforcement in Bahrain and cited that IFRS benefits overweigh its challenges. Most of the respondents in his study concluded that international IFRS enforcement will bring forth felicities that will outweigh the cost of enforcement and other issues.

Research Methodology

This research recognizes issues relevant to enforcement of IFRS in the Indian economy based on the literature review. Buckingham and Saunders (2004), Kanakriyah (2013), Phan (2014) and Phan and Mascitelli (2014) observed that in explanatory and descriptive study on any topic, questionnaires are suitable to assess the perceptions of the respondents. This present study assembled the primary data through purposive sampling technique and considered the questionnaire survey method most suitable for the requirement of the present research. This technique is convenient for obtaining meaningful data from a sample population spread over different locations. The data were collected from a total of 75 chartered accountants during the period from July to December 2018. The questionnaire was emailed and couriered randomly to 160 respondents across the country, out of which only 75 respondents responded accurately with complete information, 30 questionnaires were excluded due to incompleteness and the rest of the 55 accounting experts returned the questionnaire. This study endeavours to recognize and assess the readiness, advantages and pitfalls related to IFRS enforcement in India. The questionnaire was developed after in-depth research and was pretested to suit the purpose of research. The data were collected to obtain meaningful responses through administering a well-structured 5-point Likert scale questionnaire using ‘1: Strongly Disagree’, ‘2: Disagree’, ‘3: Neutral’, ‘4: Agree’ and ‘5: Strongly Agree’. The questionnaire was structured and divided into two divisions where the first part emphasized upon the demographic details of respondents, and the later part incorporated research questions associated with IFRS readiness, benefits and challenges. Descriptive findings have been applied, which is similar to Innes (1990) and Thorne et al. (2014). The study reveals the extent of readiness, benefits and challenges associated with IFRS enforcement mechanisms through deviations and correlation, and Kruskal–Walis test was applied to determine if there is any significant difference between the perception of participants with respect to their role and professional affiliations. Table 1 demonstrates the demographic details of the total participants.

Table 1.

Demographic Table.

Variable	Sub-value	Frequency	Percentage (%)
Gender
	Male	42	56.00
	Female	33	44.00
Total		75	100
Age
	Under 30 years	44	59
	30–40 years	28	37
	40–50 years	2	3
	50+ years	1	2
Total		75	100
Professional association
	Self practice	12	16.00
	Audit firm employee	45	60.00
	Other corporate employee	18	24.00
Total		75	100
Specialized domain (position and profile)
	Accountants	18	24.00
	Auditors	38	51
	Tax officers	18	24
	Others	1	1
Total		75	100
Experience
	Less than 5 years	66	88.00
	5–10 years	6	8.00
	10–15 years	1	1
	15+ years	2	3
Total		75	100

Source: The authors.

Table 1 represents the descriptive statistics regarding background information of participants such as gender, age, level of education, roles and position, professional affiliation, years of experience, etc.

The survey indicated a male response rate of 56% and a female response rate of 44%, which conveys a massage that this sample included more male accounting professionals than females. The sample participants represent that majority of respondents (total 96% including both below 30 years and 30–40 years) were young, only 4% respondents were aged above 40 years. In additions, 60% of the participants were working with the audit firm, followed by 24% working in other firms and the rest 16% chartered accountants had their own practice. The sample included approximately 51% auditors, 24% accountants, 24% tax officers, and the rest of them handled sales tax, value-added tax (VAT), doing their own practice, etc. Table 1 indicates that approximately 88% of chartered accountants had an experience below 5 years, which reveals that the majority of participants were young chartered professionals; around 8% of the respondents had a total experience of up to 10 years. Thus, it can be inferred that the majority of the respondents for the current research purpose were young male accounting professionals, working in audit firms and as auditors and accountants.

Data Analysis and Interpretations

This current study endeavours to assess the perception of chartered accountants during the transition phase regarding their alertness and preparedness for the issues associated with Ind-AS. In terms of readiness, the accounting professionals perceived a substantial number of roadblocks during the enforcement process; the sample represents young and proficient accounting experts who were responsive to IFRS adoption. Nevertheless, this transition phase towards IFRS enforcement must undergo an extensive journey in the Indian subcontinental domain before it is enforced entirely. Hence, this research focuses on all potential areas of friction to provide an insightful and sustainable road map for IFRS enforcement in India and assist in developing a universal accounting grammar.

Table 2 explains the respondent’s awareness about the Indian GAAP, Ind-AS and IFRS. Most of the respondent, approximately 73.33%, indicated that they are acquainted with Indian GAAP, Ind-AS and IFRS and understand the technicalities and complex process associated with IFRS; rest of the 26.67% reported having little or no knowledge about IFRS though they were familiar with the Indian GAAP. Since India is in the transition phase with respect to IFRS-converged Ind-AS implementation, when asked about the adoption of IFRS, around 70.67% reported positively that their company has already enforced IFRS-based Ind-AS. Most of the participants acknowledged the fact that since IFRS is a high-quality accounting standard, it is highly advisable to implement IFRS. Only 29.33% of the respondents answered negatively that the IFRS-converged Ind-AS was implemented yet. Nevertheless, these accounting experts were further asked to indicate the timeline for their respective organizations to shift to IFRS-based Ind-AS. A majority of them, that is, 54.50% stated that their company will shift within 2 year, and 41% reported a 5-year timeline. Countries such as India, South Africa and Ethiopia lack institutional and governmental support in IFRS implementation process.

Table 2.

Awareness About Indian GAAP, IFRS and Ind–AS.

Details	Response	Frequency	Percentage (%)
Do you know about the existence of Indian GAAP, IFRS and Ind-AS (IFRS-converged accounting standards)	Yes	55	73.33
	No	20	26.67
	Total	75	100
Has your company shifted its financial reporting from Indian GAAP to Ind-AS (IFRS-converged accounting standards)	Yes	53	70.67
	No	22	29.33
	Total	75	100
If No, then, within what time frame your company is considering to adopt Ind-AS (IFRS-converged accounting standards), if given a chance	NA	1	4.50
	2 years	12	54.50
	5 years	9	41.00
	Total	22	100

Source: The authors.

Table 3 illustrates the internal reliability for readiness, benefits and challenges by using Cronbach’s alpha test. The Cronbach’s alpha scores range between 0.69 and 0.91 for each item. The author has employed 10 standardized variables for readiness and 6 standardized variables, each for both benefits and issues. Malhotra and Dash (2008) stated in their study that Cronbach’s alpha scores of more than 0.60 explain the reliability of the data. It indicates the satisfactory level of internal consistency. Hence, according to Pallant (2011), the inter-item internal reliability of the measures used in this study is highly acceptable.

Table 3.

Cronbach’s Alpha Test Results (reliability statistics).

Item	Cronbach’s Alpha Value	Cronbach’s Alpha Value based on Standardized Items	Number of Items
Readiness	0.70	0.79	10
Benefits	0.88	0.91	6
Challenges	0.69	0.76	6

Source: The authors.

Table 4.

India’s Readiness for Ind-AS (IFRS-converged accounting standards).

Details	N	Mean	Std. Dev.	Min.	Max.
How much aware are you with respect to Ind-AS?	75	3.75	0.99	2.00	5.00
Do you think that cost involved in compliance with Ind-AS would be huge?	75	2.99	1.17	1.00	5.00
Do you think level of staff knowledge as the biggest challenge in transitioning to Ind-AS?	75	3.29	0.96	1.00	5.00
How does your company perceive adoption of Ind-AS as the new accounting mandate	75	3.56	1.17	1.00	5.00
Are you aware of changes necessitated in IT systems for Ind-AS implementation?	75	3.67	0.84	1.00	5.00
If yes, then do you think you have systems capable of dual GAAP reporting?	75	4.17	0.69	2.00	5.00
Do you think that your company has allocated funds for Ind-AS implementation in their annual budgets?	75	4.05	0.93	1.00	5.00
Do you think that increased complexities in preparing financial statements will increase the risk of error and omissions in your organization?	75	4.04	0.92	1.00	5.00
Do you think that in your organization, the degree of availability of training and knowledge towards Ind-AS (IFRS-converged Accounting Standards) is sufficient?	75	2.75	0.86	1.00	5.00
Do you think that use of IFRS in your organization will help the accountants and auditors in preventing frauds	75	3.99	0.69	2.00	5.00

Source: The authors.

Numerous studies, involving Ernest & Young (in 2009), KPMG (in 2010) and PWC (in 2008), have recognized major accounting issues during the transition phase for various companies that were planning to implement IFRS and indicated that Leases (IAS17), indefeasible rights of use and capacity arrangements (IFRIC 4), impairment of assets (IAS 36), inventories (IAS 2), marketing costs, revenue recognition (IAS 18), activation cost and subscription fees, etc., are few major barriers in the IFRS adoption mechanism. The present study incorporated 10 questions on preparedness regarding IFRS-based Ind-AS compliance mechanism and surveyed the chartered accountants. The results are presented in Table 4 with mean, deviation and maximum response values. Table 4 represents India’s preparedness towards IFRS enforcement. Majority of the respondents (mean response of 4.17) stated that their organizations had systems capable of dual reporting for both India GAAP and Ind-AS. Most of the accounting experts (mean response of 4.05) believed that their company had sufficient funds to enforce IFRS-based Ind-AS. However, the majority of the accounting professionals (mean value of 4.04) also believed that due to its technicality and complex process, the financial statement reflects significant errors and omissions. Only few chartered accountants (mean response of 2.75) agreed that the extent of training and knowledge provided in their organization was sufficient; on the contrary, most participants were of the opinion that their organizations did not provide substantial training regarding IFRS enforcement. Hence, most of the accounting professionals consented that India is not yet fully prepared to enforce IFRS-based Ind-AS

Table 5.

Benefits of Ind-AS (IFRS-Converged Accounting Standards).

Details	N	Mean	Std. Dev.	Min.	Max.
Ind-AS (IFRS-converged accounting standards) will improve the analysis of information for decision-making	75	4.25	0.77	2.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will bring more accuracy, transparency and reliability of accounting information in financial statements.	75	4.26	0.66	3.00	5.00
Ind-AS (IFRS converged accounting standards) adoption will provide for better inter-firm comparison of financial reports	75	4.12	0.82	2.00	5.00
Ind-AS (IFRS converged accounting standards) adoption will boost easy access to capital market (including foreign investors)	75	4.00	0.79	2.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will bring ease of using one set of high quality reporting standard.	75	4.23	0.73	2.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will provide for timely reporting of the financial position of their company	75	3.88	0.82	2.00	5.00

Source: The authors.

Apparently, IFRS is more comprehensive than the Indian local standards; hence, it is perceived by all the users and preparers that the enforcement of IFRS will enhance quality of financial reporting in India. There are various benefits associated with IFRS enforcement as per all officials such as it will provide better and transparent information for decision-making, and IFRS will improve the efficiency of the Indian stock market. There are evidences available across to validate that benefits of IFRS are prominent. Ikpefan and Akande (2012) recognized in their research that listed companies obtain a lot of benefits from IFRS conversion mechanism. In today’s modern economic environment, convergence with foreign reporting requirements will assist the companies in streamlining their financial reporting. According to Meeks and Swann (2009), firms enforcing IFRS had reflected higher accounting quality in their post-adoption period. Table 5 presents the mean responses of accounting professionals; most of the respondents (mean value of 4.26) perceived that Ind-AS (IFRS-converged accounting standards) enforcement will bring more accuracy, transparency and reliability of accounting information in financial statements. Majority of accounting experts also believed (mean values of 4.25 and 4.23, respectively) that IFRS-based Ind-AS enforcement will assist all the officials in decision-making and will provide a sustainable single accounting grammar. Over 130 countries that have successfully enforced IFRS witnessed various benefits such as transparency, uniformity, easy access to international capital maker and attracting more foreign investment in their respective countries. Few chartered accountants with a mean value of 3.88 were of the opinion that IFRS-based Ind-AS enforcement will assist in timely reporting. Hence, overall, Table 5 inferred that most of the qualified accounting professionals were of the opinion that IFRS adoption will bring enormous benefits to financial reporting system in India.

Table 6.

Challenges of Ind-AS (IFRS-converged accounting standards).

Details	N	Mean	Std. Dev.	Min.	Max.
Ind-AS (IFRS-converged accounting standards) adoption will increase the burden of accounting professionals (preparers) and managers and CEOs (Users) due to complexity of conversion.	75	3.97	0.77	1.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will require changes in Indian tax accounting policies and practices.	75	3.75	0.81	2.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will be difficult due to Inadequate training facilities at an unaffordable cost.	75	3.80	0.55	3.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will be complex due to fair value measurement, which is highly obstructive.	75	3.76	0.67	2.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will require major changes in IT infrastructure because of complexity of IFRS.	75	4.05	0.61	3.00	5.00
Ind-AS (IFRS-converged accounting standards) adoption will call for thorough inspection of an acquisition transaction to recognize hidden or unreported elements, which may complicate accounting.	75	4.12	0.68	2.00	5.00

Source: The authors.

Many studies in the past recognized that IFRS enforcement will bring numerous benefits, but the study also highlighted the cost and challenges associated with IFRS implantation process. Countries such as Ethiopia, Africa, Malaysia and India have evidenced major barricades towards enforcement of IFRS. According to Owolabi (2011), institutional weaknesses in regulation, compliance and enforcement of standards and rules are key barriers in Africa. As per Bakre (2007), Okike (2007) and ROSC (2004), such complications have resulted in corporate scandals in Nigeria, where audit committees were found to have indulged in such practices. As per many studies conducted in the past, standards reporting and information technology (IT) considerations are among the main challenges that should be considered when planning to implement IFRS. Table 6 demonstrates the challenges associated with IFRS enforcement in India. Many respondents with a mean value of 4.12 and 4.05 perceived that adoption will demand for an in-depth analysis of an acquisition transaction to rectify unreported elements; hence, it will increase the complexities and will require major modification in IT infrastructure. Shifting form local Indian standards to international financial reporting will require an overhauling in accounting software. Issues such as time value of money, revaluation for non-current assets, fair value measurement and revenue recognition will impose huge challenges on Indian companies. Majority of accounting professionals with the mean value of 3.96 and 3.80, respectively, were of opinion that IFRS enforcement in India will impose a huge training cost because of its complexity and technicality. They reported that IFRS enforcement will also enhance the burden of accounting experts and users such as chief executive officers (CEOs), managers, government, investors, lenders, etc., due to its complex nature. These accounting expert with mean value of 3.75 believed that IFRS-based Ind-AS will require modifications in existing Indian taxation system.

Table 7 narrates the single most significant reason for IFRS convergence mechanism. The majority of participants—48% —perceived mandatory application of IFRS as the single most significant factor for IFRS enforcement. Approximately 25.33% endorsed IFRS enforcement due to uniform accounting system. The ranks illustrate the significance reasons on the basis of responses. Rank 1 signifies the most significant reason and rank 5 signifies least significant factor. Table 7 recognizes transparency and investment opportunity being the least important reason for switching to IFRS-converged Ind-AS.

Table 8 narrates the single most significant reason for not adopting IFRS. The majority of participants—45% —reported that resistance to adopt new things is the single most significant factor for not implementing IFRS. The ranks illustrate the significant reasons on the basis of responses. Rank 1 signifies the most significant reason, and rank 5 signifies least significant factor. Table 8 recognizes the high cost of adoption being least important reason for not switching to IFRS-converged Ind-AS.

Table 7.

The Single Most Important Reason to Switch from Indian GAAP to Ind-AS (IFRS-converged accounting standards).

Details	Count	Percentage (%)	Rank
Transparency	1	1.33	5
Comparability	13	17.33	3
Investment opportunity	6	8.00	4
Existence of uniform accounting system	19	25.33	2
Mandatory application of IFRS	36	48.00	1
Total	75	100.0

Source: The authors.

Table 8.

The Single Most Important Reason Not to Switch from Indian GAAP to Ind-AS (IFRS-converged accounting standards).

Details	Count	Percentage (%)	Rank
High cost of adoption	11	14.67	4
Lack of knowledge	15	20.00	2.5
Resistance to adopt new things	34	45.33	1
Lack of training	15	20.00	2.5
Total	75	100.0

Source: The authors.

Table 9.

Descriptive Statistics.

	Mean	Std. Error	Std. Deviation	Variance	Kurtosis	Skewness
Readiness	3.624	0.103	0.895	0.831	0.552	−0.339
Benefits	4.113	0.088	0.764	0.588	−0.390	−0.431
Challenges	3.908	0.014	0.681	0.471	0.709	−0.486

Source: The authors.

Table 9 illustrates the overall descriptive (means, standard deviation, variance, skewness and kurtosis) results for readiness, benefits and challenges. The benefit with a mean value of 4.113 is more than the challenges with mean value of 3.908, which indicates an obvious outcome based on participants’ responses that advantages of IFRS enforcement overweighs the cost and pitfalls associated with IFRS. However, the mean value for readiness is 3.624, which is less than challenges that state that thought benefits associated with IFRS adoption mechanism is more than challenges, but India is not yet fully ready for complete convergence with IFRS. IFRS implementations issues like training costs, complexities associated with IFRS enforcement, infrastructure hurdles, and technology and software issues are major roadblocks that pose a threat with respect to IFRS enforcement.

A Kruskal–Wallis H-test is a rank-based non-parametric test that is applied by researchers to assess if there is statistically significant difference between two or more groups of independent variables on dependent variables. A Kruskal–Wallis H-test was employed in the present study as shown in Tables 10 and 11 to assess any statistical substantial differences of conceptions among three groups of professional associations and four groups of position and profiles on readiness, advantages and pitfalls associated with IFRS enforcement. The test was conducted by using a mean value of the three items, that is, readiness, benefits and challenges, and the results are showcased in Tables 10 and 11. The Kruskal–Wallis H-test output explains that both working in audit firm and other industries acknowledged upon the readiness, advantages and pitfalls linked with IFRS-based Ind-AS enforcement. Table 11 reflects the same as accountants, auditors, tax officers and others also acknowledged that Indian financial reporting system is not yet completely prepared for full IFRS convergence, and that cost associated with IFRS enforcements are substantial, but they strongly believe that it does not overweigh the benefits. The perception regarding the readiness, benefit and challenges are not significantly different between the participants as p-value < 0.05, which indicates that accounting professionals perceive the same way irrespective of their role and affiliation with respect to readiness, benefits and challenges. The overall benefits with 3.92 and 4.02 is more than the mean for challenges which is 3.76 and 3.78. This outcome summarizes that benefits linked to IFRS enforcement overweigh the cost associated with IFRS enforcement.

Table 10.

Kruskal–Wallis H-test for Professional Affiliation.

Items	Self-Practice		Employed in Audit Firms		Corporate Employee		Kruskal–Wallis H-test (for all three groups)
	Mean of Mean		Mean of Mean		Mean of Mean		Chi-square	p-value
	Response	Rank	Response	Rank	Response	Rank
Readiness	3.57	35.13	3.70	42.30	3.48	29.87	4.59	0.101
Benefits	3.92	30.25	4.21	41.57	4.01	34.63	3.21	0.201
Challenges	3.76	28.38	4.03	44.06	3.91	30.05	8.48	0.143

Source: The authors.

Table 11.

Kruskal–Wallis H-test for Role and Position.

Items	Accountants		Auditors		Tax Officer		Others		Kruskal–Wallis H-test (for all four groups)
	Mean of Mean		Mean of Mean		Mean of Mean		Mean of Mean		Chi-square	p-Value
			Response	Rank	Response	Rank	Response	Rank
Readiness	3.64	37.44	3.65	39.82	3.62	38.44	2.95	4.75	4.97	0.174
Benefits	4.02	35.00	4.16	39.50	4.21	41.00	3.34	11.00	3.98	0.263
Challenges	3.78	31.92	3.96	39.66	3.99	42.65	3.50	21.75	3.60	0.308

Source: The authors.

Conclusion

An in-depth review of existing literature on the topics produced substantial evidence of studies in relation to developed economies like Singapore, Hong Kong, Japan and many other countries, but there was very few studies available relating to developing economies such as India, Ghana, Ethiopia, Indonesia, etc. The present research collected the data from 75 accounting professionals to assess the level of preparedness with respect to IFRS enforcement in India. The study concludes that the perspective of the accounting experts, majority of whom were auditors, were sceptical about the preparedness towards IFRS enforcement in their organizations and stated that the country has to equip itself with large-scale infrastructural support and training facilities with respect to IFRS. They were of the opinion that the advantages of IFRS convergence mechanism were significant and more than the challenges of IFRS implementation. In addition, they also perceived that the cost of shifting from Indian local accounting standards to IFRS-based Ind-AS was much lower than the advantages. According to Landsman et al. (2012), the IFRS enforcement will bring forth three major advantages: improved informational content, enhanced flow of foreign funds and reduced gap in reporting.

As a matter of fact, in India the IFRS enforcement will bring forth many challenges and a critical question is, how to achieve a trade-off between the cost and benefits while implementing IFRS. Many researchers such as Firoz et al. (2011), Jain (2011), Rathod (2006), Ray (2012) and Rudra and Bhattacharjee (2011) applied quantitative methods on secondary data to recognize the effects of IFRS enforcement on financial statements. Bhattacharyya (2012) reported in his study that experience of IFRS enforcement and benefits, as well as the factors for applying IFRS, will be different among countries subject to their accounting and regulatory frameworks. Thus, a country-specific research is recommended to assess the preparedness and cost associated with IFRS-based Ind-AS.

In a nutshell, this study focuses on evaluating the readiness, overall benefits and challenges associated with IFRS implementation. The research outcome endorses the enforcement of IFRS because the overall benefits outweigh challenges. Though, the Indian financial reporting system is still not completely ready for full convergence for IFRS based Ind.-AS but once the challenges addressed strategically, the enormous advantages associated with IFRS enforcement will benefit both the companies and the economy as a whole. This research outcome is supported by Richmell Baaba Amanamah (2017) who reported that the benefits of enforcing the IFRS outweigh the challenges. This research provides practical implications for Indian accounting professionals and managers on identifying the critical issues regarding preparedness and benefits of IFRS convergence and the outcomes are practically significant for both the users and the preparers.

The limitation of the research is the limited sample data. The study surveyed only 75 accounting experts, which do not represent the whole population. The present article consists of only 10 items for readiness and 6 items for each advantages and pitfalls regarding IFRS enforcement in India, which might not be substantial. Future academicians can assess the perceptions of respondents based on their affiliation to the accounting world.

Future studies may incorporate a more diversified and large sample data and can expand the research across national boundaries. The significance of IFRS can be evaluated through value relevance as well, which recognizes the impact of IFRS enforcement on financial report in terms of both pre-implementation and post-implementation.

Footnotes

Declaration of Conflicting Interests

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

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