The use of IFRS (International Financial Reporting Standards) is becoming so widespread that it has already been applied in over a 100 Countries which includes the likes of European Union, Hong Kong, Australia, South Africa, Russia and Singapore amongst others. As Companies have now aggressively started globalising their operations, IFRS is increasingly becoming the need of the hour.
But Confusion still prevails over the difference between Adoption of IFRS and Convergence with IFRS. Although in common parlance, many users are using them interchangeably, but there exists a significant difference between the two which all users of IFRS must understand and implement.
Adoption of IFRS, in simple terms, means that the Country applying IFRS would be Implementing IFRS in the same manner as issued by the IASB and would be 100% compliant with the guidelines issued by IASB.
However, Convergence with IFRS means that the Accounting Standard Board of the Country applying IFRS would work together with IASB to develop high quality compatible Accounting Standards over time. Thus, Countries converging with IFRS may deviate to a certain extent from the IFRS’s as issued by the IASB.
More Conversion will make Adoption easier and less costly and may even make adoption of IFRS unnecessary. However, the supporters of Adoption, believe that Convergence alone cannot eliminate all the differences between the 2 sets of Standards.