IFRS • IFRS stands for “International Financial Reporting Standards” and includes International Accounting Standards (IASs). • §IFRSs are developed and approved by IASB (International Accounting Standard Board). • These are standards for reporting financial results and are applicable to general purpose financial statements and other financial reporting of all profit-oriented entities. • IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards.
IFRS-Introduction(Contd) • International Financial Reporting Standards comprise: • 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
Why IFRS • Increasingly being recognised as Global Reporting Standards for financial statements. • As global capital markets become increasingly integrated, many countries are moving to IFRS • More than 100 countries such as European Union, Australia, New Zealand and Russia currently permit the use of IFRS in their countries. • Increased growth of international business • Encourage international investing and thereby lead to more foreign capital inflows into the country • IFRS would enhance the comparability between financial statements of various companies across the globe • Benefit investors who wish to invest outside their own country • Reduce cost of compliances by reducing different accounting requirements
IFRS In India • Earlier it was to be implemented from 1st April 2011 in the following manner: • Phase I (opening balance sheet as at 1 April, 2011):- 1. Companies which are part of BSE - Sensex 30 and NSE - Nifty 50 2. Companies whose shares or other securities are listed outside India; 3. Companies whether listed or not, having net worth of more than Rs. 1,000 crores.
IFRS in India(Contd) • Phase II (opening balance sheet as at 1 April, 2013):- Companies not covered in Phase 1 and having net worth exceeding Rs. 500 crores. • Phase III (opening balance sheet as at 1 April, 2014):- Listed companies not covered in earlier phases But now the implementation has been deferred and the new date is not known.
Benefits to India • Improved access to International capital markets • Reduction in Cost of capital • Benchmarking with Global peers • Avoidance of multiple reporting • Reflecting true value of acquisitions
Challenges in adopting IFRS • Regulatory endorsement and acceptance • Shortage of skilled resources • Huge cost of enhancement of IT systems • Acceptance by tax authorities • Business issues like management reporting system, employee benefit plan , tax planning etc.