An overview of IFRS & Challenges involved in first time adoption The Institute of Chartered Accountants of India, Bangalore 1st December’2010
CA Aditya Singhal M.Com, FCA, DISA(ICAI)
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Authoritative literature
• IFRS
• IFRS
• IAS
• IFRIC
• SIC
• Order of authoritativeness
• IFRS including any appendices
• Interpretations
• Appendices to IFRS that do not form part of the standards
• Implementation guidance issued by IASB
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IASC & its Objectives
• IASC was founded in 1973
• 2001 -IASC was set up as part of a restructuring
• Objectives of the IASC Foundation are
• To develop a single set of high quality global accounting standards to help participants in the worlds capital markets and other users make economic decisions
• To promote use and rigorous application of those standards
• To take into account the special needs of small and medium sized entities
• To bring about convergence of national accounting standards and IFRS
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IASC FOUNDATION 19 Trustees, Appoint, Oversight, Funding
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IASB 12 Full-time and 2 Part-time Approve standards, Exposure Drafts. Interpretations
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STANDARDS ADVISORY COUNCIL I I INTERNATIONAL FINANCIAL REPORTING
(SAO) | I INTERPRETATIONS COMMITTEE (IFRIO) Approx. 45 Members | | 12 Members
STEERING COMMI'I'I'EES For Major Agenda Projects
Framework for preparation and presentation of Financial Statements
• Framework provides a conceptual framework as a foundation for the preparation and appraisal of accounting standards
• FRAMEWORK is the FOUNDATION of many IFRS but is not an IFRS
• It does not have the same authority as an IFRS
• In some circumstances there may be conflict between the Framework and an IFRS. In such cases the requirements of the specific IFRS always prevail over the Framework
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The Framework
Elements Recognition Qualitative Characteristics
Measurement – Presentation
Understandability Underlying assumptions Accrual Basis Going Concern
Comparability - Content
Relevance Reliability
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Assets - Liability - Equity - Income - Expenses
-Residual interest in the entity’s
-Increase in economic benefit
- Decrease in economic benefits
assets after deducting all of its liabilities
- During the accounting period - In the form of inflows, enhancement
- During the period - In the form of
-It is sub-divided in the statement of financial position -Resource -Controlled by an entity -As a result of past event
in assets or decrease -From which
in liability -Other than those relating to contribution from equity participants
outflows, depletion of assets or incurrence of liability economic benefits are expected to flow to the entity
-Present obligation -Arising from past events -The settlement of which is expected to result in an outflow from the entity of economic benefits
- Other than that which relates t o distributions to equity participants T h e -E l e m e n t s
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Recognition criteria
• Recognition is the process of incorporating an item that meets the definition of an element and satisfies the recognition criteria into the SOFP or SCI
• An item that meets the definition of an element (asset, liability, income or expense) should be recognized if :
• It is probable that any economic benefit associated with the item will flow to or from the entity
• The item has a cost or value that can be measured reliably
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Measurements of Elements Historical cost
Present value
Realizable cost
Fair Value
Current Cost
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IFRS – From India perspective
IFRS would be applicable into three phases:
In Phase II it would be applicable w.e.f. 1st April’2013 to
In Phase III it would be applicable w.e.f. 1st
• The companies
April 2014 to, whether listed or not, having a net worth exceeding Rs. 500 Crore but not exceeding Rs. 1000 Crore. In phase I it would be applicable w.e.f. 1st April’2011 to:
• Companies which are part of NSE- Nifty 50 & BSE- SENEX 30,
• Companies whose shares or other securities are listed on stock exchanges outside India and
• Companies, whether listed or not,
• All the remaining listed companies having net worth which have a net worth in excess of Rs. 1000 Crore.
less than Rs. 500 Crore.
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Conceptual Differences
• Substance over form
• Fair value
• Current and Non-Current Classification
• Discounting (Time value of money)
• Standards prevail over law
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