There are several challenges that will be faced on the way to IFRS convergence. These are:
1. The difference between GAAP and IFRS:
The adoption of IFRS means that the entire set of financial statements will be required to undergo a drastic change. The differences are wide and very deep. It would be a challenge to bring about awareness of IFRS and its impact on the users of financial statements.
2. Training and Education:
Lack of training facilities and academic courses on IFRS will also pose challenges in India. There is a need to impart education and training on IFRS and its application.
3. Legal Consideration:
Currently, the reporting requirements are governed by various regulators in India and their provisions override other laws. IFRS does not recognize such overriding laws. The regulatory and legal requirements in India will pose a challenge unless the same is been addressed by respective regulatory authorities.
4. Taxation EFFECT :
IFRS convergence would affect most of the items in the financial statements and consequently, the tax liabilities would also undergo a change. Thus the taxation laws should address the treatment of tax liabilities arising on convergence from Indian GAAP to IFRS.
5. Fair value Measurement:
IFRS uses the fair value as a measurement base for valuing most of the items of financial statements. The use of fair value accounting can bring a lot of instability and prejudice to the financial statements. It also involves a lot of hard work in arriving at the fair value and valuation experts have to be used.