INTERNATIONALIZATION OF INDIA ACCOUNTING STANDARD AND ITS IMPACT ON INDIAN COMPANIES

Abstract

The importance of international accounting practice studies has grown over the past few years to meet economic agent demands and to facilitate international business practices. It is essential to understand that international accounting convergence is an important topic for capital market regulators, investors, markets, governments and all others who deal with financial information of public companies. Indian companies are also raising their capital globally due to diversification, cross-border mergers, investments or divestments.

The adoption of accounting standards that require high-quality, transparent, and comparable information is welcomed by investors, creditors, financial analysts, and other users of financial statements. It is difficult to compare worldwide information without a common set of accounting and financial reporting standards. The use of a single set of high quality accounting standards would facilitate investment and other economic decisions across borders, increase market efficiency, and reduce the cost of raising capital.

The motivation for this paper is to evaluate the impact on financial risk of Indian companies by disclosing their accounting information under IFRS. Financial risk of the company is associated with level of liquidity, profitability, leverage and the earnings ratio of the company. As a matter of fact, better disclosures reduce the estimation risk of future earnings, thereby reducing the cost of information asymmetry that occurs due to adverse selection and risk premium which in turn reduces the financial risks faced by the companies and increases the economic activities. For Analysis, different ratios have been used and for testing hypothesis, t test with p-value is considered.