Introduction to IFRS

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Introduction to IFRS

• IFRS stands for International Financial Reporting
  Standards.
• IFRS is A Set of International Accounting
  Standards stating how particular types of
  transaction and other events should be reported
  in financial statement
• IFRS-A set of Financial Reporting Standards
  issued by the International Accounting Standards
  Board (IASB) is recognized under the brand name
  IRRSs. IFRSs is a trade mark of the
  International Accounting Standards Committee
  Foundation. IFRSs comprise of
• International Financial Reporting Standards
• International Accounting Standards and
• Interpretations originated by the International
  Financial Reporting Interpretations Committee(
  IFRIC) and
• Interpretations issued by the former Standing
  Interpretations Committee ( SIC).

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Introduction to IFRS

• Presently there are 8 International Financial
  Reporting Standards, 29 International Accounting
  Standards , 15 IFRIC interpretations and 11 SIC
  interpretations.
• The IASB is an independent standard setting body
  of the International Accounting Standards
  Committee Foundation (IASC Foundation).
• Structure of IASC Foundation and IASB
• The International Accounting Standards Committee
  (IASC) was renamed as International Accounting
  Standards Board ( IASB). The principal
  responsibilities of the IASB are to
• Develop and issue International Financial
  Reporting Standards and Exposure Drafts, and
• Approve Interpretations developed by the
  International Financial Reporting Interpretations
  Committee (IFRIC).

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Introduction to IFRS

• Objective OF IFRS
• To standardize accounting methods and procedures.
• To lay down principles for preparation and
  presentation.
• To establish benchmark for evaluating the quality
  of financial statements prepared by the
  enterprise.
• To ensure the users of financial statements get
  creditable financial information.
• To attain international levels in the related
  areas

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Introduction to IFRS

• Accounting Standards and the Companies Act, 1956
• As per Section 211 sub sections (3 A), (3 B) and
  (3 C) inserted by the Companies Amendment Act,
  1999 w.e.f. 31.10.1998
• (3A) every P L Account and Balance Sheet shall
  comply with accounting standards,
• (3 B) deviations, if any, to be disclosed with
  reasons and financial effect of deviation,
• (3 C) "accounting standards" means standards of
  accounting recommended by ICAI or as may be
  prescribed by Central Govt. in consultation with
  National Advisory Committee on Accounting
  Standards.
• Section 217 sub section (2AA) inserted by the
  Companies Amendment Act, 2000 w.e.f. 13.12.2000
• (2AA) The Board's report shall also include a
  Directors' Responsibility Statement indicating
  therein (1) that in preparation of annual
  accounts, the applicable accounting standards had
  been followed along with proper explanation
  relating to material departure.
• Section 227 sub section (3)(d) inserted by the
  Finance Act, 1999 w.e.f. 31.10.1998
• (3)(d) the auditor's report shall also state
  whether, in his opinion, the P L Account and
  the Balance Sheet comply with accounting
  standards referred in section 211 (3C),
• (4) where answer to (3)(d) is negative or with
  qualification, it shall also state the reasons
  thereof.

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Introduction to IFRS

• WHY IFRS ?
• India is one of the over 100 countries that have
  or are moving towards IFRS ( International
  Financial Reporting Standards) convergence with a
  view to bringing about a uniformity in reporting
  systems globally, enabling businesses, finances
  and funds to access more opportunities.
• Indian companies are listed on overseas stock
  exchanges and have to recast their accounts to be
  compliant with GAAP requirements of those
  countries. Foreign companies having subsidiaries
  in India are having to recast their accounts to
  meet Indian overseas reporting requirements
  which are different.
• Foreign Direct Investors (FDI), overseas
  financial institutional investors (FII) are more
  comfortable with compatible accounting standards
  and companies accessing overseas funds feel the
  need for recast of accounts in keeping with
  globally accepted standards.
• ICAI has decided to implement IFRS in India. The
  Ministry of Corporate Affairs has also announced
  its commitment to convergence to IFRS by 2011.

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Introduction to IFRS

• IFRS To WHOM APPLICABLE ?
• Compliance with IFRS in India is restricted to
  Public Entities which include those companies
  entities listed on any stock exchange or have
  raised money from the public, or have a
  substantial public interest, or public sector
  companies. IFRS in India would cover the
  following public interest entities in the first
  phase.
• Listed companies
• Banks, insurance companies, mutual funds, and
  financial institutions
• Turnover in preceding year gt INR 1 billion
• Borrowing in preceding year gt INR 250 million
• Holding or subsidiary of the above
• IFRS is not applicable to SMEs as of now

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Introduction to IFRS

• WHEN IFRS ?
• IFRS for public entities in India is applicable
  from 01/04/2011. The opening IFRS balance sheet
  at the date of transition to IFRS 01/04/2010,
  which is the start date for full comparative
  information presentation in IFRS
• IMPACT OF IFRS
• IFRS implementation affects several areas of the
  business entity, such as presentation of
  accounts, the accounting policies and procedures,
  the way legal documents are drafted, the way the
  entity looks at its assets and their usage, as
  well as the its communications with its
  stakeholders and also the way it conducts its
  business.
• This fundamental and pervasive nature of impact
  of IFRS, makes it imperative that sufficient
  planning and thought is given to this aspect and
  choices made at the transition stage itself, as
  they determine the effect on the company and its
  operations.
• A detailed analysis of all aspects of impact and
  change as well as all legal documentation and
  communication becomes necessary.

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Introduction to IFRS

• LIST OF IFRS
• IFRS-1 First time Adoption of International
  Financial Reporting Standards
• IFRS-2 Share-based payments
• IFRS-3 Business Combinations
• IFRS-4 Insurance Contracts
• IFRS-5 Non Current Assets held for sale and
  Discontinued Operations
• IFRS-6 Exploration for and evaluation of Mineral
  Resources.
• IFRS-7 Financial Instruments-Disclosures
• IFRS-8 Operating Segments

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Introduction to IFRS

• LIST OF IASs
• 1. IAS 1 Presentation of Financial Statements
• 2 IAS 2 Inventories
• 3. IAS 7 Statement of Cash Flows
• 4. IAS 8 Accounting Policies, Changes in
  Accounting Estimates and Errors
• 5. IAS 10 Events after the Reporting
  Period
• 6. IAS11 Construction Contracts
• 7. IAS12 Income Taxes
• 8. IAS16 Property, Plant and Equipment
• 9. IAS17 Leases
• 10. IAS18 Revenue
• 11. IAS19 Employee Benefits
• 12. IAS20 Accounting for Government Grants and
  Disclosure of Government
• Assistance
• 13. IAS21 The Effects of Changes in Foreign
  Exchange Rates
• 14. IAS23 Borrowing Costs
• 15. IAS 24 Related Party Disclosures

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Introduction to IFRS

• LIST OF IASs
• 16. IAS 26 Accounting and Reporting by Retirement
  Benefit Plans.
• 17. IAS 27 Consolidated and Separate Financial
  Statements
• 18. IAS 28 Investments in Associates
• 19. IAS 29 Financial Reporting in
  Hyperinflationary Economies
• 20. IAS 31 Interests in Joint Ventures
• 21 IAS 32 Financial Instruments Presentation
• 22. IAS 33 Earnings per Share
• 23. IAS 34 Interim Financial Reporting
• 24. IAS 36 Impairment of Assets
• 25. IAS 37 Provisions, Contingent Liabilities and
  Contingent Assets
• 26. IAS 38 Intangible Assets
• 27. IAS 39 Financial Instruments Recognition
  and Measurement
• 28. IAS 40 Investment Property
• 29. IAS 41 Agriculture

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Introduction to IFRS

• List of IFRIC Interpretations as on 30.11.2009
• 1. IFRIC 1 Changes in Existing Decommissioning,
  Restoration and Similar Liabilities
• 2. IFRIC 2 Members' Shares in Co-operative
  Entities and Similar Instruments
• 3. IFRIC 4 Determining Whether an Arrangement
  Contains a Lease
• 4. IFRIC 5 Rights to Interests Arising from
  Decommissioning, Restoration and Environmental
  Rehabilitation Funds.
• 5. IFRIC 6 Liabilities Arising from
  Participating in a Specific Market - Waste
  Electrical and
• Electronic Equipment
• 6. IFRIC 7 Applying the Restatement Approach
  under IAS 29 Financial Reporting in
  Hyperinflationary Economies
• 7. IFRIC 8 Scope of IFRS 2
• 8 IFRCI 9 Reassessment of Embedded Derivatives
  
• 9. IFRIC 10 Interim Financial Reporting and
  Impairment
• 10 IFRIC11 IFRS 2 Group and Treasury Share
  Transactions
• 11. IFRIC 12 Service Concession Arrangements
• 12. IFRIC13 Customer Loyalty Programme
• 13. IFRIC 14 IAS 19 The Limit on a Defined
  Benefit Asset, Minimum Funding Requirements an
• their Interaction
• 14. IFRIC 15 Agreement for the Construction of
  Real Estate

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Introduction to IFRS

• List of SIC Interpretations as on 30.11.2009
• 1. SIC 7 Introduction of the Euro
• 2. SIC 10 Government Assistance No Specific
  Relation to Operating Activities
• 3. SIC 12 Consolidation Special Purpose
  Entities
• 4. SIC 13 Jointly Controlled Entities
  Non-Monetary Contributions by Ventures
• 5. SIC15 Operating Leases Incentives
• 6. SIC 21 Income Taxes Recovery of Revalued
  Non-Depreciable Assets
• 7. SIC 25 Income Taxes Changes in the Tax
  Status of an Enterprise or its
• Shareholders
• 8. SIC 27 Evaluating the Substance of
  Transactions in the Legal Form of a Lease
• 9. SIC 29 Disclosure Service Concession
  Arrangements
• 10. SIC 31 Revenue Barter Transactions
  Involving Advertising Services
• 11. SIC 32 Intangible Assets Website Costs

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Introduction to IFRS

• Requirements of IFRS
• IFRS financial statements consist of (IAS1.8)
• A Statement of Financial Position
• A Comparative Income Statement
• Either a statement of changes in equity (SOCE)
  or a statement of recognized income or expense
  ("SORIE")
• A Cash Flow Statement or Statement of Cash Flows
• Notes, including a summary of the significant
  accounting policies
• Comparative information is provided for the
  previous reporting period (IAS 1.36). An entity
  preparing IFRS accounts for the first time must
  apply IFRS in full for the current and
  comparative period although there are
  transitional exemptions (IFRS1.7).

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Introduction to IFRS

• On 6 September 2007, the IASB issued a revised
  IAS 1 Presentation of Financial Statements. The
  main changes from the previous version are to
  require that an entity must
• present all non-owner changes in equity (that is,
  'comprehensive income' ) either in one statement
  of comprehensive income or in two statements (a
  separate income statement and a statement of
  comprehensive income). Components of
  comprehensive income may not be presented in the
  statement of changes in equity.
• present a statement of financial position
  (balance sheet) as at the beginning of the
  earliest comparative period in a complete set of
  financial statements when the entity applies an
  accounting
• 'balance sheet' will become 'statement of
  financial position'
• 'income statement' will become 'statement of
  comprehensive income'
• 'cash flow statement' will become 'statement of
  cash flows'.
• The revised IAS 1 is effective for annual periods
  beginning on or after 1 January 2009. Early
  adoption is permitted.

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Introduction to IFRS

• First Time Adoption of IFRS
• IFRS 1  requires an entity to comply with each
  IFRS  effective at the reporting date for its
  first IFRS  financial statements. In particular,
  the IFRS  requires an entity to do the following
  in the opening IFRS  balance sheet that it
  prepares as a starting point for its accounting
  under IFRSs
• Recognize all assets and liabilities whose
  recognition is required by IFRSs
• Do not recognize items as assets or liabilities
  if IFRSs do not permit such recognition
• Reclassify items that it recognized under
  previous GAAP as one type of asset, liability or
  component of equity, which are different type of
  asset, liability or component of equity under
  IFRSs and
• Apply IFRSs in measuring all recognized assets
  and liabilities.

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Introduction to IFRS

• THANK YOU
• BY AVINASH SALUJA
• ACA,B.Com(H)