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






• Order of authoritativeness

• IFRS including any appendices

• Interpretations

• Appendices to IFRS that do not form part of the standards

• Implementation guidance issued by IASB


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



IASC FOUNDATION 19 Trustees, Appoint, Oversight, Funding

i I X

IASB 12 Full-time and 2 Part-time Approve standards, Exposure Drafts. Interpretations



(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



The Framework

Elements Recognition Qualitative Characteristics

Measurement – Presentation

Understandability Underlying assumptions Accrual Basis Going Concern

Comparability - Content

Relevance Reliability


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


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



Measurements of Elements Historical cost

Present value

Realizable cost

Fair Value

Current Cost


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.



Conceptual Differences

• Substance over form

• Fair value

• Current and Non-Current Classification

• Discounting (Time value of money)

• Standards prevail over law