INTERNATIONAL FINANCIAL

REPORTING STANDARDS (IFRS)

 International Accounting Standards (IAS)

• International Accounting Standards (IAS) are

older accounting standards which were
replaced in 2001 by International Financial
Reporting Standards (IFRS), issued by the
International Accounting Standards Board
(IASB), an independent international standard
setting body based in London.
 INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)
• Most of the world has been reporting under the International Financial
Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB)
• most countries across the globe have adopted/ converged with IFRS.
The last of the developed countries to adopt IFRS was Japan. Earlier,
one of the present day global super-power – China too converged with
IFRS
• After this, only two significant countries, viz., India and USA, were not
using IFRS. However, USA allows IFRS for foreign private issuers with
securities traded on US exchanges.
• India has fulfilled its promise of compliance with international financial
reporting standards (IFRSs) by adopting an amended version of IFRS,
known as the Indian Accounting Standards (Ind ASs).
 Features of IFRS
• These are global accounting standards.
• These standards are ‘principle based’, and not ‘rule-based’.
• IFRS are developed and maintained by the IASB.
• These are issued with the intention of applying these standards
across the globe on a consistent basis.
• It ensures high quality transparent reporting that would ensure
comparability among the entities across the globe.
• Every standard has a specific structure to ensure uniformity and
facilitate reading, interpretation and application. They are:
Introduction, Standards, Basis of Conclusion (BC), Implementation
Guidelines (IG), Illustrative Examples (IE), and Dissenting Opinions of
board members.
IFRS
IFRS 1: First Time Adoption of International
Financial Reporting Standards
• It provides the framework for switching over from existing set of accounting principles
to IFRSs based accounting principles.
• IFRS1 requires an entity to comply with each IFRS effective at the reporting date for its
first IFRS financial statements.
• IFRS 1 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:
a) Recognise all assets and liabilities whose recognition is required by IFRSs;
b) Do not recognise items as assets or liabilities if IFRSs do not permit such recognition;
c) Reclassify items that it recognised 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
d) Apply IFRSs in measuring all recognised assets and liabilities.

• The standard sets out certain concession that is granted to the first time adopter for
applying accounting policies as per IFRS and restatement of accounts.
 IFRS 2: Share-based Payment
• This standard deals with the recognition of share-based payment
transactions of an entity.
• IFRS 2 requires an entity to recognise share-based payment transactions
in its financial statements, including transactions with employees or
other parties to be settled in cash, other assets, or equity instruments of
the entity.
• IFRS 2 recognises three types of share based payments. They are:
a) Equity-settled transactions for goods or services acquired by an entity;
b) Cash-settled but price or value of the goods or services based on the
equity instrument of the entity; and
c) Transactions for goods or services acquired by the entity in which either
the entity can settle or supplier can claim settlement by equity
instruments of the entity.
 IFRS 3: Business Combinations
• A business combination is a transaction or event in which acquirer
obtains control over a business (e.g. acquisition of shares or net assets,
legal mergers, reverse acquisitions)
• IFRS 3 establishes principles for how an acquirer:
a) Recognises and measures the identifiable assets acquired, liabilities
assumed and non-controlling interests.
b) Recognises and measures goodwill acquired in a business combination
or a gain from a bargain purchase.
c) Determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.
• All business combinations in the scope of IFRS 3 should be accounted
for using the Acquisition Method of accounting.
 IFRS 4: Insurance Contracts
• IFRS 4 sets out the reporting requirements for entities
that issue insurance and reinsurance contracts.
• Issuance of IFRS 4 was a first step towards standardizing
the diverse accounting practices that exist in the
insurance sector.
• It allows insurers to continue to use their existing
accounting policies for liabilities arising from insurance
contracts as long as the existing policies meet certain
minimum requirements set out in IFRS 4.
 IFRS 5: Non-current Assets Held for Sale and
Discontinued Operations
• This standard provides the principles for measurement and
presentation of ‘held for sale’ asset and liabilities, and related
profit or loss.
• The assets which meet the criteria to be classified as held for sale
are to be measured at the lower of carrying amount and Fair Value
less Costs to Sell, and depreciation charge on such assets to ceases.
• Held for sale assets and liabilities are required to be presented
separately in the statement of financial position as current assets
or current liabilities.
• Moreover, the results of discontinued operations to be presented
separately in the statement of comprehensive income.
 IFRS 6: Exploration for and Evaluation of
Mineral Resources
• The entities engaged in extractive activities incur significant
amount of exploration and evaluation expenditures.
• Exploration and evaluation assets are measured at initial
recognition at cost. IFRS 6 specifies various cost elements. This
standard also explains measurement after initial recognition and
impairment.
• The IASB wanted to make limited change to the existing
accounting practices. As per this standard, an entity adopting
IFRS 6 may continue to use the accounting policies applied
immediately before adopting the IFRS. This includes continuing
to use recognition and measurement practices that are part of
those accounting policies.
IFRS 7: Financial Instruments: Disclosures

• This standard focuses on disclosure of financial assets

and financial liabilities covered in IAS 32 and IAS 39.
• IFRS 7 requires entities to provide disclosures in their
financial statements that enable users to evaluate:
a) the significance of financial instruments for the
entity’s financial position and performance; and
b) the nature and extent of risks arising from financial
instruments to which the entity is exposed during the
period and at the end of the reporting period, and
how the entity manages those risks.
 IFRS 8: Operating Segments
• IFRS 8 requires identification of operating segments on the
basis of internal reports.
• This standard specifies how an entity should report
information about its operating segments in annual
financial statements and how it would present selected
information about its operating segments in interim
financial reports prepared in pursuant to IAS 34.Interim
Financial Reporting.
• It also sets out requirements for related disclosures about
products and services, geographical areas and major
customers.
 IFRS 9: Financial Instruments
• The new standard includes revised guidance
on the classification and measurement of
financial assets, including impairment, and
supplements the new hedge accounting
principles.
• IFRS 9 introduces a single classification and
measurement model for financial asset.
IFRS 10: Consolidated Financial Statements

• IFRS 10 outlines the requirements for the

preparation and presentation of consolidated
financial statements when an entity controls
one or more other entities, requiring such
entities to consolidate the entities it controls.
• The aim of IFRS 10 is to establish a single
control model that is applied to all entities
including special purpose entities.
 IFRS 11: Joint Arrangements
• This standard classifies joint arrangements into two types
—joint operations and joint ventures. • This standard
requires a joint operator to recognise and measure the
assets and liabilities (and recognise the related revenues
and expenses) in relation to its interest in the arrangement
in accordance with relevant IFRSs applicable to the
particular assets, liabilities, revenues and expenses.
• It replaces a portion of IAS 31 that relates to joint
operations. Accounting for joint ventures has also been
amended and a revised standard IAS 28 Investments in
Associates and Joint Ventures has been issued.
 IFRS 12: Disclosure of Interests in Other
Entities
• This standard is a consolidated disclosure standard
requiring a wide range of disclosures about an
entity’s interests in subsidiaries, joint arrangements,
associates and unconsolidated ‘structured entities’.
• IFRS 12 emphasises that it is necessary for financial
statement preparers to strike a balance between
burdening financial statements with excessive detail
that may not assist users of financial statements and
obscuring information as a result of too much
aggregation.
 IFRS 13: Fair Value Measurement
• This standard applies to IFRSs that require or
permit fair value measurements (both initial and
subsequent) or disclosures and provides a single
IFRS framework for measuring fair value and
requires disclosures about fair value
measurement. The Standard defines fair value on
the basis of an ‘exit price’ notion and uses a ‘fair
value hierarchy’, which results in a market-based,
rather than entity-specific, measurement.
 IFRS 14: Regulatory Deferral Accounts
• This standard permits an entity which is a first-time adopter of International
Financial Reporting Standards to continue to account, with some limited
changes, for ‘regulatory deferral account balances’ in accordance with its
previous GAAP, both on initial adoption of IFRS and in subsequent financial
statements.
• This standard permits recognition of assets and liabilities out of deferral of
expenses and income in respect of a rate regulated entity which has been
allowed by a regulator. It describes regulatory deferral account balances as
amounts of expense or income that would not be recognised as assets or
liabilities in accordance with other Standards, but that qualify to be deferred in
accordance with this IFRS 14.
• Regulatory deferral account balances, and movements in them, are presented
separately in the statement of financial position and statement of profit or loss
and other comprehensive income, and specific disclosures are required.
 IFRS 15: Revenue from Contracts with
Customers
• It specifies how and when an IFRS reporter will recognise
revenue as well as requiring such entities to provide users
of financial statements with more informative, relevant
disclosures.
• This standard establishes principles for reporting useful
information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity’s contracts with
customers.
• The standard provides a single, principles based five-step
model to be applied to all contracts with customers.
 IFRS 16: Leases
• IFRS 16 specifies how an IFRS reporter will recognise,
measure, present and disclose leases.
• The standard provides a single lessee accounting
model, requiring lessees to recognise assets and
liabilities for all leases (excepting for leases whose
lease term is 12 months or less or the underlying asset
has a low value).
• Lessors continue to classify leases as operating or
finance, with IFRS 16’s approach to lessor accounting
substantially unchanged from its predecessor, IAS 17.