International Financial Reporting Standards (IFRS) is fast becoming the de facto accounting standard across the world. The adoption of IFRS would result in one set of high-quality, globally accepted accounting standards that would bring uniformity in reporting and make the world one common market place. Different countries had taken different paths towards adopting IFRS. Some of the countries have gone for full-fledged adoption of IFRS while some others, including India, had taken the path of convergence rather than adoption.

There are varied views on adoption vs convergence. Some are of the view that adoption is the only way to achieve the goal of getting to a single set of high-quality, globally accepted accounting standards. The world is becoming one single market and adoption would result in reduced reporting costs for multinational companies, better comparability of performance of companies across the world and improved allocation of capital by global investors. The other point of view supports convergence, arguing that adoption of IFRS would result in countries giving up significant control of the standard setting process. The argument further goes that convergence, over a period of time, will help corporates in concerned countries to have a soft landing, while adopting certain standards in IFRS could put their companies in a disadvantageous position.

India had taken the route of convergence to IFRS by 2011. There is a clear road map for companies to converge, with the set of converged standards to be issued by the domestic accounting standard setters. While the government has taken this view and is moving towards it with a plan, it is important to debate whether this is the right thing to do for India.

We often hear nowadays that India is becoming an economic superpower: economic power is shifting to Asia, with countries like India and China leading the global growth. While the western economies have created a structural mess around their economies and are struggling for growth, countries like India and China are growing between 8-10% annually. Some of the economists are predicting that this is going to be the decade of Asia and, finally, countries like India are finding their rightful place in the global economic map. While India has a long way to go to become an economic superpower, considering its massive corruption and pathetic social indicators, the country is getting its rightful attention in the world because of its super growth.

If India has to find its rightful place in the world, it should shed its inhibitions and act with confidence in taking on the world.

India should be at the forefront of adopting IFRS and shaping the global debate on the standard setting process; it should forcefully participate in the global accounting standard setting process. Whether we like it or not, global investors will look down on India for having converged with IFRS in contrast to countries that adopt IFRS fully. IFRS is also a global opportunity for India on the accounting services front. It is a great opportunity for Indian accountants to service the external world. India, with its massive workforce, can become the accounting hub for the world by recreating the magic created by the IT industry. But, will our accounting professionals have the same opportunity if India converges with IFRS rather than adopting IFRS? I am not sure.

Also, the cost of capital for Indian corporates will remain high as global investors would attach a risk premium as Indian corporates would have converged and not adopted IFRS fully. Finally, this would affect Indian corporates in their globalisation process as it would become more onerous for them to list in global equity markets.

I think there is a case for India to go for full adoption of IFRS rather than convergence. The benefits for both corporates and investors in adopting IFRS outweigh those of converging. As a country, we should be at the forefront of adopting such a global change and lead that change. We can?t dream of becoming an economic superpower by living in isolation.

The other thing that the government has not done right is with reference to the date of adoption of IFRS by Indian companies. When the timeline for the adoption of IFRS was announced, the government encouraged Indian corporates to voluntarily adopt IFRS and publish it ahead of time. The Securities and Exchange Board of India had amended the listing agreement to enable corporates to voluntarily publish their IFRS numbers.

Encouraged by this, some of the companies went ahead and adopted IFRS as issued by IASB and started publishing their financials as per IFRS. The US Securities and Exchange Commission also allowed foreign filers to voluntarily adopt IFRS as issued by IASB as there is a convergence programme happening between IFRS and US GAAP.

But the current rules of the convergence programme in India insist on a transition date of April 1, 2010, for all corporates irrespective of whether they have earlier adopted IFRS voluntarily or not. This means that even though companies in India have adopted and published IFRS numbers earlier, with a different transition date (based on the encouragement from the regulators to adopt early), they need to again publish a first set of IFRS financial statements as if their transition date is April 1, 2010.

This will create an issue for corporates who had adopted IFRS early. When a company adopts IFRS at a particular point, it needs to take certain positions on treatment of goodwill, stock option expense, etc. However, insisting that corporates publish IFRS financials again, with a transition date of April 1, 2010, will totally defeat the purpose and would result in two sets of IFRS financials with no incremental benefit to investors. This will only create more confusion and is not in the best interest of any of the stakeholders. If the government is keen on the transition date of April 1, 2010, why did it encourage corporates to early adopt IFRS?

I think the government should take a more liberal view and allow corporates who had early adopted IFRS to continue publishing those numbers without the need for re-adoption with reference to the transition date of April 1, 2010, unless the impact is significant. This will ensure continuity and would allow such companies who had early adopted IFRS a smooth transition to a new regime.

The author is the chief financial officer of Infosys Technologies Ltd