Overview of IFRS

PwC
Overview of IFRS
What is IFRS?

What? Why?
International Financial Reporting • In July 2007
2007, the ICAI announced
Standards the move towards convergence with
IFRS with effect from April 1, 2011
and issued a concept paper on
Who? Convergence with IFRSs in India.
The standard setter is International • Early 2010, the Ministry of
Accounting Standards Board Corporate Affairs (‘MCA’)
( MCA ) issued
(IASB) based in London various press releases on IFRS
roadmap and convergence plan for
India reaffirming the convergence
India,
date of April 1, 2011 through 2014
for select companies.
Overview of IFRS

IFRS Proposed Roadmap for India

Opening balance sheet as at April 1* using IFRS-converged accounting standards

2011 2012 2013 2014

• NSE ‐ Nifty 50 companies, • All insurance companies • Companies listed or not,  • Listed companies having a 
• BSE ‐ Sensex 30  having a net worth between net worth of less than
companies, Rs 500 crores and Rs 1000
Rs.500 crores and Rs.1000  Rs 500 crores [Note 1]
Rs.500 crores [Note 1]
crores  [Note 1]
• Companies whose shares 
or other securities listed  • All scheduled commercial  • Urban co‐operative banks  
outside India; banks having net worth between 
Rs. 200 to Rs. 300 crores
• Companies
Companies listed or not, 
listed or not
having a net worth in  • Urban co‐operative banks  • NBFCs (all other Listed)
excess of Rs. 1,000 crores having a net worth in excess  • NBFCs (other Unlisted) 
[Note 1] of  Rs. 300 crores having net worth between 
• NBFCs  ‐ Nifty 50 or Sensex  Rs. 500  to Rs. 1000 crores
30
• NBFCs listed or not, having a 
net worth > Rs.1,000 crores
Note 1: Companies not covered in the above chart will apply ‘existing Indian accounting standards’ OR voluntarily opt to 
apply the ‘IFRS
apply the  IFRS‐converged accounting standards
converged accounting standards’.

SCI will be covered in Phase I and the first reporting period will be as at March 31, 2012.
Slide 3
Overview of IFRS

IFRS implementation timeline - MCA

(Voluntary) (Dual Reporting )

Old Statutory reporting

under Indian GAAP
GAAP

Today
First IFRS
reporting period
MCA
Timeline

31/3/2009 1/4/2010 31/3/2011 31/3/2012

Opening IFRS (Reporting Date)
Balance Sheet
Regulators still to
announce plan on
transition provisions
Q1 Q2 Q3
Interim Quarterly
Reporting on
IFRS basis

Slide 4
Overview of IFRS

Current International Financial Reporting

p g Structure
International Financial
STANDARDS Reporting
p g
Standards (IFRS) and
International Accounting
Standards (IAS)
Almost 33,000
000
pages and
increasing !!!
International Financial Reporting
p
Interpretations Committee (IFRIC)
( )
And Standing Interpretation
committee (SIC) Type Number
IFRS 9 (9)
IAS 41 (29)
IFRIC 19 (18)
Exposure Drafts and SIC 33 (11)
Draft Interpretation

Slide 5
Overview of IFRS

Fundamental areas in which Indian GAAP and IFRS differ

• Stand-alone
Stand alone v/s consolidated financial
statements
• Full compliance, qualification not
accepted
• More guidance, all mandatory
• Focus on substance over form
Indian • Focus on risks and rewards IFRS
GAAP • Present value and fair value concepts
• Estimates
• Extraordinary v/s exceptional
• Restatement of previously issued
financial statements
• Detailed disclosures

Slide 6
Overview of IFRS

Overview of Findings
• The table below provides an overview of the preliminary assessment of the potential impact of each of the
relevant financial statement components,
components identified in terms of the effort required to achieve compliance
and the potential financial impact on SCI's financial statements.
Key Impact Areas for SCI Impact Other Notes
Select Components of Financial Statements Financial Impact Disclosures Efforts Work Stream

Property, Plant and Equipment

(Component approach including dry docking, Forex gain/ loss, Policy Decision &
1 High Low High
Depreciation based on useful life to its residual value, IFRS 1 System Impact
- Deemed Fair Value option)

Revenue and Cost Recognition Policy Decision &

2 (Percentage completion method application, Barter Low Low Medium System Impact
transactions)

Determination of Functional currency

3 (Functional currency based on primary economic environment High Low Medium System Impact
in which entity operates, Presentation currency is free choice)

Investment in Joint Ventures

4 ( q y method or pproportionate
(Equity p consolidation,, JV’s to compile
p Medium Low High Data collation
financial statements as per SCI’s accounting policy)

Slide 7
Overview of IFRS

Overview of Findings
Key Impact Areas for SCI Impact Other Notes
Select Components of Financial Statements Financial Impact Disclosures Efforts Work Stream

Employee Benefits
5 Low Low Low Policy decision
(Actuarial gains and losses)

Related party Disclosures

6 Nil High Medium System Impact
(Government entities as related party)

First Time Adoption of IFRS

7 (Exemptions and Exceptions – Revaluation options / Land, Optional Low Low Policy decision
Vessel, Foreign currency translation adjustments)

Presentation of Financial Statements

(Segmental reporting, Financial Instruments disclosures,
8 Reclassification of Statement of financial position and Income Nil Low Low System impact
Statement, Recently issued accounting standards ,Classification
off Tonnage
T ttax as operating
ti expenses))

Slide 8
Overview of IFRS

Key impact areas―

Property, plant and equipment (PPE)

Parameter Statutory accounts IFRS Business impact

Componentisation of Componentisation not Significant components of High

assets required PPE with different useful
lives to be depreciated
separately
separately.
Major overhaul and Generally charged as Cost of periodic major Medium
maintenance expenses overhaul or dry docks is
generally capitalised and
amortised till the next
scheduled maintenance.
Depreciation Depreciation over prescribed PPE depreciated over High
rates estimated useful life
considering residual value
Useful Life and Not required to be revised Revised annuallly Low
Residual Value

Slide 9
Overview of IFRS

Key impact areas―

Revenue

Parameter Statutory accounts IFRS Business impact

Unfinished Voyage Income is recognised on When the outcome can be Medium

under voyage charter completed of voyage reliably estimated, revenue is
recognized by reference to
the stage of completion of the
transaction

PricewaterhouseCoopers Slide 10
First-time Adoption of IFRS

First-time Adoption of IFRS - Requirements

IFRS 1 requires
• Identify the first IFRS financial statements.

• Prepare
p an opening
p g balance sheet at the date of transition to IFRS.

• Select accounting policies that comply with IFRS, (latest version of IFRS
applicable on the reporting date) and apply those policies retrospectively

• Consider whether to apply any of the 15 optional exemptions from

retrospective application.

• Apply the 4 mandatory exceptions from retrospective application.

• Make extensive disclosures to explain the transition to IFRS.

Slide 11
Presentation of financial
IAS 1R- Presentation statement
of Financial Statements

PwC
Overview of IFRS

Components of financial statements

A complete set of financial statements comprises
• The primary statements
- Statement of financial position for the period end
- Statement of comprehensive income for the period
- Statement of changes
g in equity
q y for the p period
- Statement of cash flows for the period
• Notes, including summary of accounting policies and other explanatory
information

An entity may use titles for the statements other than those prescribed in IAS 1R,
however the titles used shall not be misleading.
All primary statements of equal prominence
Slide 13
Overview of IFRS

Statement of Financial Position

Basis of presentation
Classified Balance sheet
An entity shall present current and non-current asset, and current and non-
current liability as separate classification on the face of the statement of
financial position
p

Exception to above rule

• When a presentation based on liquidity provides information that is reliable
and more relevant.
• All assets and liabilities are required to be presented in the order of liquidity.

Choice
Ch i d driven
i b
by ttype off b
business
i
• Manufacturers and retailers → current/non-current basis
• Financial institutions, banks and real estate companies → liquidity basis

Slide 14
Overview of IFRS

Statement of Financial Position

Current vs. Non-current Classification

C
Current
t assett C
Current
t liliability
bilit
Expected to be realised, sold or consumed Expected to be settled within entity’s normal
within entity’s normal operating cycle operating cycle

Held primarily for trading purposes Held primarily for trading purposes

Expected to be realised within 12 months after Expected to be settled within 12 months after
balance sheet date balance sheet date

No unconditional right to defer settlement for

Unrestricted cash or cash equivalent
at least 12 months after balance sheet date

An entity shall classify all An entity shall classify all

other assets as other liabilities as
non current
non-current. non current
non-current.

Slide 15
Overview of IFRS

Statement of Financial Position

Minimum line items
• Property,
Property plant and equipment • Held for sale assets and assets
• Investment property included in disposal groups
• Intangible assets • Trade and other payables

• Financial assets (other than those • Provisions

shown on other line items) • Financial liabilities (other than those
• Investments accounted for using the shown on other line items)
equity
q y method • Current tax assets and liabilities
• Biological assets • Deferred tax assets and liabilities
• Inventories • Liabilities included in disposal groups
• Trade and other receivables • Minority
Mi it iinterest
t t
• Cash and cash equivalents • Issued capital and reserves
attributable to owners of the parent
An entity shall present additional line items, headings and subtotals in the statement of financial
position when such presentation is relevant to an understanding of the entity's financial position.
Slide 16
Overview of IFRS

Statement of Comprehensive Income

Basis of presentation
An entity shall present all items of income and expense recognised in a period
• in a single statement of comprehensive income, or
• in two statements:
– a statement
t t t displaying
di l i components t off profit
fit or loss
l (separate
( t income
i
statement) and
– a second statement beginning with profit or loss and displaying
components t off other
th comprehensive
h i income
i ((statement
t t t off
comprehensive income).

Slide 17
Overview of IFRS

Statement of Comprehensive Income

Application of the requirement to analyse expenses
• Choose most relevant presentation analysis method by:
- Function - usually used by manufacturers, retailers, etc.
- Nature - usually used by financial institutions, etc.
• If analysis
l i b by ffunction
ti iis provided,
id d additional
dditi l note
t di
disclosures
l analysing
l i th the
nature of expenses is required

Slide 18
Overview of IFRS

Statement of Comprehensive Income

Minimum line items
• Revenue • Each component of other
• Finance costs comprehensive income by nature
• Share of profit or loss of associates • Share of other comprehensive
and joint ventures iincome off associates
i t and
d jjoint
i t
ventures
• Tax expense
• Total comprehensive income
• Discontinued operations attributable to:
• Profit or loss - Minority interest
• Profit or loss attributable to: - Owners of the pparent
- Minority interest
- Owners of the parent

An entity shall not present any items of income or expense as extraordinary items
Slide 19
Overview of IFRS

Statement of Comprehensive Income

Additional line items, headings and sub-totals
• Required when relevant to an understanding of performance
• Description and order of line items amended where necessary to explain
elements of performance
• Framework qualitative characteristics of financial statements
- Understandability
- Relevance
- Reliability
- Comparability
• Undefined terms may y be used where relevant to an understanding
g ((subject
j
to meeting qualitative characteristics)

Slide 20
Overview of IFRS

Other Comprehensive Income (‘OCI’)

Components of Other Comprehensive Income
• Changes in revaluation surplus (on account of PPE and intangibles)
• Actuarial gains and losses on defined benefit plans recognised in full in
equity, if the entity elects the option available under IAS 19
• Gains and losses arising from translation of a foreign operation
• Gains and losses on re-measuring available-for-sale financial assets
• Effective portion of gains and losses on hedging instruments in a cash flow
h d
hedge.
All non-owners change in equity are recognised in OCI
Components
C t off OCI shall
h ll b
be presented
t d either
ith nett off related
l t d taxes
t or att gross off
related tax with one amount representing aggregate amount of income tax relating to
those components.
It
Items off income
i and
d expense are recognised
i d in
i profit
fit or lloss unless
l standards
t d d
prescribe or permit otherwise.
Slide 21
Overview of IFRS

Other Comprehensive Income (‘OCI’)

‘Recycling’ of other comprehensive income
Reclassifications (‘recycling’)
( recycling ) - as required by standards items previously
recognised in OCI shall be transferred to Statement of Comprehensive Income

Recycled
y under
It
Items R
Remarks
k
IFRS?

Revaluation of PPE and intangible Decrease can only be recognised in OCI if they
No
assets reverse previous increments for the same asset
Actuarial gains/losses on defined
No Immediate recognition in retained earnings
benefit plans (optional)
FX gains/losses from the translation
Yes Transfer to P&L required
of foreign operations
Gain/losses on revaluation of
Yes Transfer to P&L required
available-for-sale financial assets
Effective portion of gains/losses Transfer to P&L or include in cost/carrying amount
Yes
f
from cashh flow
fl h
hedges
d off non-financial
fi i l assett or liliability
bilit (b
(basis
i adjustment)
dj t t)

Slide 22
Overview of IFRS

Statement of changes in shareholders’ equity

• This statement shows movements/ transactions during the reporting period that have
affected the shareholders’ equity.
• It is generally tabular in approach with the various categories of equity across the top
common shares, additional paid-in capital, retained earnings, other reserves.
• The transactions are listed line by
y line and include amongst
g others – net income for
the year, cumulative translation adjustments (if applicable), issue of shares,
dividends paid, other movements in shares.
• The outcome is a reconciliation in the movement of each category
g y of shareholder’s
equity from one period to the next.

Slide 23
Overview of IFRS

Statement of cash flows

Direct versus Indirect Method

• Enterprise
te p se may
ay choose
c oose to report
epo t tthe
e cas
cash flow
o from
o ope
operating
at g act
activity
ty by us
using
g
either the direct or the indirect method

• Reconciliation of net income and net cash flow from operating activity is required to
be provided if the direct method is used

Net Cash provided by or used in:

• Operating activities

• Investing activities

• Financing activities

• Net increase (decrease) in cash and cash equivalent

Slide 24
Overview of IFRS

Notes to financial statements

Notes to financial statements comprise of:

• Background of the Company

• Significant accounting policies

• Accounting estimates

• Changes in accounting policies

• Concentration of risks

• Schedule of individual material items on B/s, I/s, CF and Sh Equity

• Explanation of material transaction e.g., acquisition, disposal.

• Recently issued pronouncements and their implications

Slide 25
Thank You

This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You
should not act upon the information contained in this presentation without obtaining specific professional advice. No representation or
warranty (express or implied) is given as to the accuracy or completeness of the information contained in this presentation, and, to the
extent permitted by law, presenter or the Company for which he works, its members, employees and agents accept no liability, and
disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information
contained in this presentation or for any decision based on it. Without prior written permission of presenter, the contents of this
presentation may not be quoted in whole or in part or otherwise referred to in any documents.

This restricted access information was prepared by PricewaterhouseCoopers ("PwC") for the sole benefit and use of Shipping
Corporation of India (SCI) pursuant to a client relationship exclusively between PwC and SCI. PwC makes no representations or
warranties regarding the information and expressly disclaims and neither accepts nor assumes any contractual or other responsibility or
liability to any other person or entity based on its use of, reliance on or access to this information. This information is not intended to be
relied upon by anyone other than SCI.

© 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” , a registered trademark, refers to PricewaterhouseCoopers Private Limited (a
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