What does convergence with IFRS mean?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Puja Agarwal asked about 3 years ago

What does convergence with IFRS mean?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 3 years ago

Convergence with IFRS means full compliance with IFRS as a basis for the financial reporting system in Malaysia. We use the word “convergence” rather than “adopt” as we will still be following a Malaysian due process and will also need to comply with local legislation on financial reporting. So, a dual framework is still envisaged and the intention is to fully converge or align the two frameworks as at 1 January 2012.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered about 3 years ago

Many jurisdictions have cultural, legal, or political obstacles to an immediate full adoption of IFRSs. In the light of those obstacles, some countries decide on strategies of continuous convergence with IFRSs. Put differently, they have decided to bring their national standards to a point where the amounts reported in the financial statements are the same as in IFRS financial statements. We respect the reasons why those jurisdictions reach that decision, and work with them to support their convergence process. However, in doing so, it is our ultimate objective to make full adoption of IFRSs possible because we believe that only then will a country be able to fully benefit from the advantages of using IFRSs. Only recently, in January this year and as a result of the second Constitution Review, the Trustees of our organisation emphasised, through an amendment to the Constitution, that convergence is not an objective in itself but is a means to achieve the adoption of IFRSs. While convergence may be the necessary preparation for some countries to adopt IFRSs, the simplest, least costly and most straightforward approach is to adopt the complete body of IFRSs in a single step rather then opting for long-term convergence. Certainly, this is a significant change, but the alternatives may be more difficult and may be of less benefit to a country in the long run. The main reason why most companies want to use IFRSs in their financial statements is the ability to demonstrate to the investor community that their financial statements are IFRS-compliant. For that purpose it is not sufficient that the standards have converged. The only way to make a valid that claim is to apply all the standards as issued by the IASB and make the compliance representation required by IAS 1. Hence, while convergence is good, adoption is necessary to be truly able to harvest the benefits of the change.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Prity answered about 3 years ago

What does convergence with IFRS mean? International Financial Reporting Standards (IFRS) is a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of general purpose financial statements, being financial statements that are intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs. Convergence with IFRS means full compliance with IFRS as a basis for the financial reporting system in Malaysia. We use the word “convergence” rather than “adopt” as we will still be following a Malaysian due process and will also need to comply with local legislation on financial reporting. So, a dual framework is still envisaged and the intention is to fully converge or align the two frameworks as at 1 January 2012. As a consequence of the IFRS convergence plan, the Board has adopted a new due process for approving and adopting new or amended standards for application in Malaysia.

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