In the present form of Indian Accounting Standards, financial reporting is done through historical cost (carrying value), revalued historical cost, fair value and impaired costs, but with its convergence to IFRS, its measurements are to be taken and reported on fair value on each reporting date. The fair value measurement of all assets and liabilities, in compliance with FAS 157 on each reporting date, is a difficult, complex and challenging task. In this article, an attempt has been made to simplify the fair valuation process by suggesting the fair valuation of assets and liabilities, based on this present form and business use thereof, instead of fair valuations of all assets and liabilities, on each reporting date. Based on the form and business use, thereof, all the business assets and liabilities can be reclassified into four groups.

Accounting refers to the measurement of economic events and the summing and reporting of the same in the form of financial statements for use by various stakeholders, bankers, debtors and creditors, etc., i.e., the basic function of accounting is to serve as a means of communication. Thus, the financial results of different business entities cannot be compared and evaluated unless they are communicated in a similar language by adopting similar accounting method and practices. In order to overcome these difficulties, accounting standards are formulated to maintain uniformity in accounting measurement. The accounting standards lay down the rule for the measurement and presentation of accounting information by different organizations. In the era of globalization and liberalization, accounting standards also need to have a globalized face as a global business entity cannot afford to publish its financial results in a business language other than the global one. Prior to globalization and liberalization, there was no need for global accounting standards. Therefore, business entities used to follow localized accounting standards as per their requirements. In India too, we are following our own accounting standards prescribed by ICAI. Now, Indian companies are investing globally and are also attracting inbound global investments. Hence, it also needs to speak the globally spoken business language, i.e., IFRS, and cannot afford to lag behind. The global investor will demand a universal accounting and those who are not fluent in it are likely to lose the international investment and business opportunities. This is how the issue of convergence to International Financial Reporting Standard (IFRS) in India came up. The IFRS are the accounting standards given by the International Accounting Standards Board (IAS B). The IAS B came into existence by the renaming of the International Accounting Standards Committee in the year 2001. International Accounting Standards Committee was functional since 1973 till the year 2001 and laid down accounting standards known as International Accounting Standards (IAS). Since 2001, the IASB has given out few new standards, redrafted (modified) few IAS and adopted IAS without modifications (not redrafted). All new standards redrafted (modified) IAS and adopted IAS without modifications are known as IFRS. The new and redrafted ones are denoted as IFRS 1-8 and adopted IAS without modification are denoted as IAS 1-41 (Discontinued IAS are IAS 3,4,5,6,9,13,14,15,22,25,35). The Indian accounting standard is practically the same as IAS and its present position vis-à-vis IFRS has been depicted in the table.

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