Академический Документы
Профессиональный Документы
Культура Документы
By:
CA Kamal Garg
Present Status of Indian Accounting Standard
• Accordingly, the Ass depart from the corresponding IFRSs to maintain consistency
with legal, regulatory and economic environment, and keeping in view the level of
preparedness of the industry and the accounting professionals.
• In some cases, departures are made on account of conceptual differences with the
treatments prescribed in the IFRSs.
What is IFRS?
• IFRS are generally principles-based standards and seek to avoid a rule-book mentality.
Application of IFRS requires exercise of judgment by the preparer and the auditor in
applying principles of accounting on the basis of the economic substance of
transactions.
• The term IFRS comprises IFRS issued by IASB; IAS issued by IASC; and Interpretations
issued by the Standing Interpretations Committee (SIC) and the International Financial
Reporting Interpretations Committee (IFRIC) of the IASB.
International
Financial
reporting
Standard (IFRS)
International
Financial International
Reporting IFRS Accounting
Interpretations Standard (IAS)
Committee (IFRIC)
Standing
Interpretations
Committee (SIC)
Convergence To IFRS
• The IFRS issued by the International Accounting Standards Board (IASB) are
increasingly being recognized as Global Reporting Standards.
• More than 100 countries such as countries of European Union, Australia, New
Zealand and Russia currently require or permit the use of IFRSs in their countries.
• In line with the global trend, the Institute of Chartered Accountants of India (ICAI)
has proposed a plan for convergence with IFRS with effect from April 1, 2011.
• Convergence to IFRS would mean India would join a league of more than 100
countries, which have converged with IFRS.
Why Convergence to IFRS?
• It would also permit international capital to flow more freely, enabling companies
to develop consistent global practices on accounting problems.
• But convergence doesn’t mean that IFRS should be adopted word by word, e.g.,
replacing the term ‘true & fair’ for ‘present fairly’, in IAS 1, ‘Presentation of
Financial Statements’. Such changes do not lead to non-convergence with IFRS.
• The IASB accepts in its ‘Statement of Best Practice: Working Relationships between
the IASB and other Accounting Standards-Setters’ that “adding disclosure
requirements or removing optional treatments do not create noncompliance with
IFRSs. But additional disclosures or removing of optional treatment should be
made clear so that users of the IFRS are aware of the changes.
IFRS Reporting In India: Proposed Timelines
Reporting under IFRS, as proposed by ICAI, would be applicable for accounting periods beginning on
or after April 1,2011.
The first set of IFRS financial statements for the year ending March 31, 2012 would require
preparation of:
Opening balance sheet as on April 1, 2010
Comparative financial statements – year ending March 31, 2011
Reporting enterprises would need to ensure preparedness for IFRS reporting as early as April 2010.
Which Entities will be covered under Convergence Strategy
• Keeping in view the complex nature of IFRSs and the extent of differences between the
existing ASs and the corresponding IFRSs and the reasons therefore, the ICAI is of the
view that IFRSs should be adopted for the public interest entities from the accounting
periods beginning on or after 1st April, 2011.
Public Interest
Public
Interest
Entities
• SMEs need not adopt all the IFRS as it will be too voluminous for them.
• A separate standard for SMEs will be formulated based on the IFRS for SMEs
which is still in exposure draft stage.
• The proposed standard represents a simplified set of standards for SME's with
disclosure requirements reduced, methods for recognition and measurement
simplified and topics not relevant to SME's eliminated.
• Compliance with this IFRS for SMEs is not necessary to make India IFRS-
compliant.
Format of IFRS for India
• The format of IFRSs to be adopted for public interest entities should be the same
as that of IFRSs, including their numbers.
• The numbers of the existing Accounting Standards may be given in brackets for the
purpose of easier identification.
• Wherever required, a section may be added at the end of the adopted IFRS
indicating the Indian legal and regulatory position.
• The IFRSs when adopted will also take into account the International Financial
Reporting Interpretations issued by the IFRIC of the IASB.
• Only in rare circumstances of public interest a carve out from an IFRS may be
made.
Role of ASB in Post Convergence Scenario
Complexity in the
Impact on financial Communication of Impact Conceptual
financial reporting
performance of IFRS to investors differences
process
•For example, the Indian
•Under IFRS, companies •Due to the significant
•Companies also need to standard on intangibles is
would need to differences between Indian
communicate the impact of based on the concept that all
increasingly use fair value GAAP and IFRS, adoption of
IFRS convergence to their intangible assets have a
measures in the IFRS is likely to have a
investors to ensure they definite life, which cannot
preparation of financial significant impact on the
understand the shift from generally exceed 10 years;
statements. Companies, financial position and
Indian GAAP to IFRS. while IFRS acknowledge that
auditors, users and financial performance of
certain intangible assets may
regulators would need to most Indian companies
have indefinite lives and useful
get familiar with fair
lives in excess of 10 years are
value measurement
not unusual
techniques
Critical success factors for IFRS
conversion projects
Leadership
Strategy Communication
Critical Success
Factors
Time Resources
Categories of IFRS
Category I A Category I B
IFRSs which do not have any differences IFRS which has certain minor
with the corresponding Indian differences with the corresponding
Accounting Standards Indian Accounting Standards
• IAS 2 Inventories
IFRSs having conceptual differences with IFRSs having conceptual differences with the
the corresponding Indian Accounting corresponding Indian Accounting Standards
Standards that should be taken up with the that need to be examined to determine
IASB whether these should be taken up with the
IASB or should be removed by the ICAI itself
• IAS 17,Leases • IAS 12, Income Taxes
Category IV Category V
IFRSs, the adoption of which would require IFRSs corresponding to which no Indian
changes in laws/regulations Accounting Standard is required for the time
because compliance with such IFRSs is not being.
possible until the regulations/laws are
amended.
• IAS 1, Presentation of Financial Statements
• IAS 8, Accounting Policies, Changes in • IAS 29, Financial Reporting in Hyper-
Accounting Estimates and Errors inflationary Economies
• IAS 10, Events After the Balance Sheet Date
• IAS 16, Property, Plant and Equipment
• IAS 32, Financial Instruments: Presentation
(Exposure Draft of the Corresponding Indian
Accounting Standard has been issued)
• IAS 34, Interim Financial Reporting
• IAS 39, Financial Instruments: Recognition
and Measurement (Exposure Draft of the
Corresponding Indian Accounting Standard
has been issued)
• IFRS 1, First-time Adoption of International
Financial Reporting Standards
• IFRS 4, Insurance Contracts
• IFRS 7, Financial Instruments: Disclosures
Which way of Adoption of IFRS is preferred: stage wise on the basis of
category of IFRS or all at once from a specified future date
• However, the ICAI concluded that such a stage-wise approach may result in several
application complexities because many accounting standards are inter-related. So,
considering the challenges to transition, the ICAI has opted for an approach
whereby all IFRS should be adopted for the defined entities for accounting periods
commencing on or after April 1, 2011.
• The ICAI believes that this transition period till April 1, 2011 will enable all
participants in the financial reporting process to help in building the environment
supporting the adoption of IFRS.
Project Management for IFRS Convergence Project
• Complex tasks are easier when divided into manageable pieces and it is true for
IFRS convergence project also. Project can be broken down into three key phases.
Assess
• Benefits derived from convergence are lot but also the challenges. The success of the
convergence to IFRS in India will depend on cooperation from government, regulators and tax
departments.
• Ultimately, it is imperative for Indian entities to improve their preparedness for IFRS adoption
and get the conversion process right. Given the current market conditions, any restatement
of results due to errors in the conversion process would be detrimental to the company
involved and would severely damage investor confidence in the financial system.
• The transition to IFRS is likely to be challenging for corporate India. However, if the
transitioned is planned and managed successfully, it will generally be positive for financial
reporting in India. This will improve the quality and transparency of the financial reporting
process and further align corporate India to the global economy and the global capital
markets.
• There is an urgent need to address these challenges and work towards full adoption of IFRS in
India. The most significant need is to build adequate IFRS skills and an expansive knowledge
base amongst Indian accounting professionals to manage the conversion projects for Indian
entities . This can be done by leveraging the knowledge and experience gained from IFRS
conversion in other countries and incorporating IFRS into the curriculum for professional
accounting courses.
How we can Assist
1. IFRS Training;
2. Identification of Indian GAAP and IFRS
Differences;
3. Preparation of Convergence Manual;
4. Documentation of IFRS Convergence;
5. Preparation of IFRS Financial Statements;
6. IFRS and Indian GAAP Reconciliation;
7. Post Implementation review and follow up
Major Training Clientele Addressed
• Marico Limited;
• Apollo Tyres Limited;
• Kirloskar Brothers Limited;
• ACC Limited;
• Emerson Climate Technologies (India) Limited;
• L & T Infrastructure Finance Co. Limited;
• Tamil Nadu Newsprint and Papers Limited;
• Super Auto Forge Limited;
• Paradeep Phosphates Limited;
• Uttar Gujarat VIJ Company Limited;
• Union Bank of India;
• NTPC Limited