Sunteți pe pagina 1din 20
 What is IFRS  Why IFRS  Benefits and challenges  IAS v/s IFRS 
  • What is IFRS

  • Why IFRS

  • Benefits and challenges

  • IAS v/s IFRS

  • GAAP v/s IFRS

  • Case study on Infosys

 What is IFRS  Why IFRS  Benefits and challenges  IAS v/s IFRS 
 Meaning: Accounting Standards are the statements of code of practice of the regulatory accounting bodies
  • Meaning: Accounting Standards are the statements of code of practice of the regulatory accounting bodies that are to be observed in the preparation and presentation of financial statements.

  • Objectives of Accounting Standard

    • To standardize the financial statement presentation

    • To harmonize the diverse accounting policies followed

    • To facilitate intra-firm and inter-firm comparison.

 Globalization is the primary force behind the spread of IFRS  To bring about convergence
  • Globalization is the primary force behind the spread of IFRS

  • To bring about convergence of national accounting standards and International Accounting standards and IFRS to high quality standards.

 Globalization is the primary force behind the spread of IFRS  To bring about convergence
 IFRSs are high quality, understandable and enforceable global accounting standards  Applicable to all financial
  • IFRSs are high quality, understandable and enforceable global accounting standards

  • Applicable to all financial statements reporting of all profit- oriented entities.

  • IFRS are ‘principle based’ accounting standards

  • A separate set of IFRS for Small and Medium-sized Enterprises has been issued by the IASB in July 2009.

  • International Financial Reporting Standards comprise of:

    • International Financial Reporting Standards (IFRS) - standards issued after
      2001

    • International Accounting Standards (IAS) - standards issued before 2001

    • Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) issued after 2001

    • Standing Interpretations Committee (SIC) - issued before 2001

 A statement of financial position as at the end of the period  A statement
 A statement of financial position as at the end of the period  A statement
  • A statement of financial position as at the end of the period

  • A statement of comprehensive income for the period

  • A statement of changes in equity for the period;

  • A statement of cash flows for the period;

  • A notes, comprising a summary of significant accounting policies, and other explanatory information; and

  • A comparative statement of financial position

 A statement of financial position as at the end of the period  A statement
 There are two approaches for transition to IFRS – Convergence and Adoption  Adoption 
  • There are two approaches for transition to IFRSConvergence and Adoption

  • Adoption

    • Abandoning the existing national GAAP and embracing IFRS

    • Two years of dual reporting (IFRS)

    • After reporting date, accounting and financial reporting as per national GAAP is abandoned

 There are two approaches for transition to IFRS – Convergence and Adoption  Adoption 
 Applicability  Impact study  Accounting treatment as per IGAAP and that as per IFRS
  • Applicability

  • Impact study

    • Accounting treatment as per IGAAP and that as per IFRS

    • Measurement differences of the carrying values

    • Assets and liabilities not recognised in IGAAP but required to be

recognised in IFRS

  • Reclassification of assets and liabilities as required under IFRS

  • De recognition of assets and liabilities under IGAAP which need not be recognised under IFRS

  • Estimated time for different stages

  • Other Issues

 Applicability  Impact study  Accounting treatment as per IGAAP and that as per IFRS
 Increasing growth of international business  International investing and thereby lead to more foreign capital
  • Increasing growth of international business

  • International investing and thereby lead to more foreign capital inflows into the country

  • Comparability between financial statements of various companies across the globe

  • Level of confidence to investors

  • Reduce cost of compliances

  • Professional opportunities to serve international clients

  • Risk Evaluation

 Increasing growth of international business  International investing and thereby lead to more foreign capital
 Consolidation of group financial statements made easier  Accounting and audit functions made easier and
  • Consolidation of group financial statements made easier

  • Accounting and audit functions made easier and cheaper

  • Compliance with regulatory requirements of bodies

such as stock exchanges

  • Mergers and acquisitions made easier

  • Access to multinational funds

 Awareness about international practices  Training  Increase in initial cost and IT systems 
  • Awareness about international practices

  • Training

  • Increase in initial cost and IT systems

  • Comply with the Companies Act, 1956,Income Tax Act, 1961, SEBI, RBI, etc

  • Training to stakeholders, employees, auditors, regulators, tax authorities, etc needed

  • Differences between Indian GAAP and IFRS may impact business decision financial performance of an entity

  • Limited pool of trained resource and persons having expert knowledge on IFRS

  • Management compensation plan

  • Taxation

  • Fair Value

 IFRSs are principle-based standards instead of rule based.  IFRSs lay down treatments based on
  • IFRSs are principle-based standards instead of rule based.

  • IFRSs lay down treatments based on the economic substance over legal form.

 IFRSs are principle-based standards instead of rule based.  IFRSs lay down treatments based on
 Components of Financial statements  Format of SOFP  Format of Income statement  Statement
  • Components of Financial statements

  • Format of SOFP

  • Format of Income statement

  • Statement of cash flows

  • Presentation of extraordinary items

  • Dividends proposed after the end of the reporting period

  • Depreciation rates

  • Change in the depreciation method

 Entire class of assets to be revalued  Component accounting  Functional and foreign currency
  • Entire class of assets to be revalued

  • Component accounting

  • Functional and foreign currency

  • Goodwill

  • Measurement of intangible assets

  • Actuarial gain or loss

  • Contingent asset- disclosure

  • Entities operating in hyper-inflationary economies

 IFRS 1: First time Adoption of International Financial Reporting Standards  IFRS 2: Share based
  • IFRS 1: First time Adoption of International Financial Reporting Standards

  • IFRS 2: Share based Payment

  • 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

 Permanent Differences  Timing Differences  Fair Value  Converging Balance sheet gain/loss
 Permanent Differences  Timing Differences  Fair Value  Converging Balance sheet gain/loss
  • Permanent Differences

  • Timing Differences

  • Fair Value

  • Converging Balance sheet gain/loss

Presentation IAS 32 Recognition/ Measurement IAS 39 Disclosure IFRS 7

Presentation

IAS 32

Recognition/

Measurement

IAS 39

Disclosure

IFRS 7

 IAS 32, following items are not financial instruments  Physical Assets  Assets such as
 IAS 32, following items are not financial instruments  Physical Assets  Assets such as
  • IAS 32, following items are not financial instruments

    • Physical Assets

    • Assets such as pre-paid expenses

    • Deferred revenue expenses

  • Recognition of financial instruments

    • Carrying amount of the liability component is determined first

    • Carrying amount of the equity instruments, with the option to convert the instrument into ordinary shares

  • Proceeds of - Carrying amount = Carrying amount

    Issue

    of liability

    component

    of equity

    instrument

     IAS 39, financial assets to be classified in one of the below 4 categories 
    • IAS 39, financial assets to be classified in one of the below 4 categories

      • Financial assets at fair value through profit and loss

      • Loans and receivables

      • Held to maturity investments

      • Available for sale financial assets

     IAS 16- Accounting Treatment of Fixed Assets  Componentization  Inspection Cost  Depreciation 
     IAS 16- Accounting Treatment of Fixed Assets  Componentization  Inspection Cost  Depreciation 
    • IAS 16- Accounting Treatment of Fixed Assets

      • Componentization

      • Inspection Cost

      • Depreciation

  • IAS 2- Inventory

    • Cash discount on Inventory

    • LIFO v/s FIFO