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IFRS

IFRS. International Financial Reporting Standards By- Team Professional Times. IFRS. IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

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IFRS

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  1. IFRS International Financial Reporting Standards By- Team Professional Times

  2. IFRS • IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. • Issued by IASB (International Accounting Standard Board) • IFRS consists of: • IFRSs - International Financial Reporting Standards • IFRICs – International Financial Reporting Interpretation Committee • SICs – Standing Interpretations Committee • Currently 8 IFRSs, 29 IASs, 16 IFRICs and 10 SICs are effective.

  3. Convergence to IFRS • Convergence means to achieve harmony with IFRS i.e. to design the national accounting standards in such a way that financial statements prepared in conformity with national accounting standards will comply with IFRS. • “All at once approach” has been adopted for convergence with IFRS

  4. Ind AS • ICAI issued the “Concept paper on Convergence with IFRS in India” in 2007 • In February 2011, MCA notified 35 Indian Accounting Standards (Ind AS) converged with IFRS. • Ind AS are substantially similar to IFRS. However, they have some carve outs to ensure that they are suitable for India’s economic environment. • Initially, these standards were applicable for accounting periods commencing on or after 1 April 2011 in a phased manner. Implementation date has now been deferred. • MCA has recently announced the implementation date of Ind AS to be April 2013. • Till the implementation date, current accounting standards (notified under the “Companies Accounting Standard Rules, 2006”) will be applicable. After the implementation date, existing AS shall be applicable to SMCs.

  5. Opportunities for CAs • Provide trainings • Develop softwares • Access to global markets • More jobs • Increased remuneration • Increased opportunities for tax experts So it becomes imperative for us to have knowledge of the IFRS and its impact in the financial statement so we can capitalize the opportunities available due to convergence.

  6. Lease Accounting IAS 17 Leases

  7. Lease An arrangement whereby : • Lessor conveys to the lessee • In return for a payment or series of payment • Right to use an asset • For an agreed period of time Right to use asset Payments Lessor Lessee

  8. Classification of Leases • Types of leases • Finance Leases- A lease that transfers substantially all risks and rewards incidental to the ownership of the leased asset • Operating Leases – Leases other than finance lease • Classification is to be made at the inception* of the lease * Inception of the lease is the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease

  9. Finance Leases • Indicators of a finance lease • Lease transfers ownershipof asset to the lessee by the end of lease term • Lessee has option to purchase the asset a price sufficiently lower than the FV at the date the option becomes exercisable and at the inception of the lease it is reasonably certain that the option will be exercised. • lease term is for the major part of the economic life of the asset • PV of the minimum lease payments amounts to substantially all of the FV of the leased asset at lease inception • lease assets are of a specialised nature such that only the lessee can use them without major modifications being made • Some more indicators • Lessee is entitled to cancel the lease and lessor’slosses on cancellation are borne by the lessee • Risk of fluctuations in the fair value of the residual fall to the lessee • Lessee has the ability to continue to lease for a secondary period at a rent that is substantially lower than market rent

  10. Accounting for Finance Leases

  11. Accounting for Operating Leases

  12. Definitions • Commencement of lease term - date from which lessee is entitled to exercise its right to use the leased asset • Lease term – non cancellable period (+) further period for which lessee has the option to lease the asset and at the lease inception it is reasonably certain that lessee will exercise this option • Minimum lease payments- lease rentals, excluding contingent rent and cost of services and taxes to paid by and reimbursed to the lessor together with guaranteed residual value • Net investment in lease - gross investment (MLPs receivable + unguaranteed residual value) in the lease discounted at the interest rate implicit in the lease • Contingent rent – Not fixed portion of lease rental

  13. IFRS vs. Indian GAAP vs. Ind AS

  14. Thank You

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