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).
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).
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
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. Introduction to IFRS
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.
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 > INR 1 billion Borrowing in preceding year > INR 250 million Holding or subsidiary of the above IFRS is not applicable to SME’s as of now
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.
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
Introduction to IFRS LIST OF IASs 1. IAS 1 Presentation of Financial Statements 2IAS 2 Inventories 3.IAS 7 Statement of Cash Flows 4. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 5. IAS10 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
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
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 14IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements an their Interaction 14. IFRIC 15 Agreement for the Construction of Real Estate 15 IFRIC 16 Hedges of Net investments in a Foreign Operation 16 IFRIC 17 Distribution of Non Cash Assets to Owners 17. IFRIC 18Transfer of Assets from Customers * Interpretations contained in IFRIC 8 and IFRIC 11 are now included in IFRS 2 ( as amended in June 2009).
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
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). Introduction to IFRS
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.
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. Introduction to IFRS
THANK YOU BY AVINASH SALUJA ACA,B.Com(H) Introduction to IFRS