Question

A brief decription on the below topic:

Impact of IFRS Adoption on Financial Decisions: Case study of Indian Information Technology Industry: WIPRO Ltd.".

Answer 1

Being a global business it is required to follow a same way of reporting, as Wipro Ltd. being in to IT sector providing the IT related service world wide although being the Headquarters in India is listed both in India(BSE &NSE) and New York Stock Exchange where it come the dual reporting requirement for the company one as per Indian GAAP and other as per US GAAP respectively. Overcome such dual reporting the step towards adoption of IFRS is being considered which will ensure the Financial reporting in both countries as a same in terms of figures.

It is considered to apply IFRS to overcome few of the common issuses faced in dual reporting method, which are as follows:

-Time consuming, as the financial reports were supposed to be made in two different compliances.

-Different figures, as the balance sheet or financial statements following two different accounting principles resulted in to different results, i.e., Losses in one case and profits in the other.

To overcome multiple reporting and to address global stakeholders, a uniform system of reporting was felt necessary to facilitate comparisons, which resulted in the establishment of International Accounting Standard Board (IASB) which issues International Financial Reporting Standards (IFRS). Certain Indian companies having listed in foreign stock exchanges are reporting IFRS voluntarily in their financial statements. The present study tries to understand the impact of this voluntary adoption of IFRS on the financial decision makers through a case analysis of Wipro Ltd. The analysis compared the ma jor financial parameters under IFRS and Indian GAAP as reported by Wipro Ltd for a period of four years from 2009 -10 to 2012-13. The results postulate an increase in liquidity ratios; interest coverage ratio; marginal increase in debt equity ratio; and no significant increase in profitability ratios except net profit ratio which rose slightly in the year 2013. Overall the results indicate that the adoption of fair value accounting and strict requirement in adhering to accounting standards have strengthened the financial indicators an d provided the decision makers a transparent, true and fair accounting highlighters.