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

Introduction to IFRS
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
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 SMEs 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 IFRS-2 IFRS-3 IFRS-4 IFRS-5 IFRS-6 IFRS-7 IFRS-8 First time Adoption of International Financial Reporting Standards Share-based payments Business Combinations Insurance Contracts Non Current Assets held for sale and Discontinued Operations Exploration for and evaluation of Mineral Resources. Financial Instruments-Disclosures Operating Segments

Introduction to IFRS
LIST OF IASs
1. 2 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. IAS 1 IAS 2 IAS 7 IAS 8 IAS 10 IAS11 IAS12 IAS16 IAS17 IAS18 IAS19 IAS20 IAS21 IAS23 IAS 24 Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Construction Contracts Income Taxes Property, Plant and Equipment Leases Revenue Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures

Introduction to IFRS
LIST OF IASs
16. 17. 18. 19. 20. 21 22. 23. 24. 25. 26. 27. 28. 29. IAS IAS IAS IAS IAS IAS IAS IAS IAS IAS IAS IAS IAS IAS 26 27 28 29 31 32 33 34 36 37 38 39 40 41 Accounting and Reporting by Retirement Benefit Plans. Consolidated and Separate Financial Statements Investments in Associates Financial Reporting in Hyperinflationary Economies Interests in Joint Ventures Financial Instruments : Presentation Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Financial Instruments : Recognition and Measurement Investment Property Agriculture

Introduction to IFRS
List of IFRIC Interpretations as on 30.11.2009
1. 2. 3. 4. IFRIC 1 IFRIC 2 IFRIC 4 IFRIC 5 Changes in Existing Decommissioning, Restoration and Similar Liabilities Members' Shares in Co-operative Entities and Similar Instruments Determining Whether an Arrangement Contains a Lease Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies Scope of IFRS 2 * Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment IFRS 2: Group and Treasury Share Transactions Service Concession Arrangements Customer Loyalty Programme IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements an their Interaction Agreement for the Construction of Real Estate Hedges of Net investments in a Foreign Operation Distribution of Non Cash Assets to Owners
Transfer of Assets from Customers

5. IFRIC 6 6. IFRIC 7 7. IFRIC 8 8 IFRCI 9 9. IFRIC 10 10 IFRIC11* 11. IFRIC 12 12. IFRIC13 13. IFRIC 14 14. IFRIC 15 15 IFRIC 16 16 IFRIC 17 17. IFRIC 18

* 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. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. SIC 7 SIC 10 SIC 12 SIC 13 SIC15 SIC 21 SIC 25 SIC 27 SIC 29 SIC 31 SIC 32 Introduction of the Euro Government Assistance No Specific Relation to Operating Activities Consolidation Special Purpose Entities Jointly Controlled Entities Non-Monetary Contributions by Ventures Operating Leases Incentives Income Taxes Recovery of Revalued Non-Depreciable Assets Income Taxes Changes in the Tax Status of an Enterprise or its Shareholders Evaluating the Substance of Transactions in the Legal Form of a Lease Disclosure Service Concession Arrangements Revenue Barter Transactions Involving Advertising Services Intangible Assets Website Costs

Introduction to IFRS
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
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.

Introduction to IFRS
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)