Overview of Ind- AS (IFRS)
ORIENTATION PROGRAMME FOR NEWLY QUALIFIED CHARTERED ACCOUNTANTS
The Institute of Chartered Accountants of India, Bangalore, 16th March’2011
CA Aditya Singhal M.Com, FCA, DISA(ICAI),CertIFRS, Six Sigma (GB & BW)
Join IFRS professional group for regular IFRS update: http://finance.groups.yahoo.com/group/IFRS-Professional/
Convergence with IFRSs: Need of the Hour!!
• IFRSs are increasingly being recognized as Global Financial Reporting Standards
• >113 countries currently require/permit use of or have policy of convergence with IFRSs
–Brazil & Canada-announced convergence from 2010 & 2011 respectively
–Securities & Exchange Commission (SEC), USA has permitted filing of IFRS-compliant financial statements without requiring presentation of reconciliation statement between US GAAPs and IFRSs.
–SEC roadmap permitting US domestic companies to prepare financial statements as per IFRSs:
#Will examine this proposal and take a decision in 2011 #If considered fit, allow them to do so from 2014
Why IFRS ?
• Better transparency
• Cost effectiveness
• Scope of professional judgment
• Fair valuations
Framework for preparation and presentation of Financial Statements
wE\ements I .
Q' . . recognition Measurement
First time Adoption - 5 step process
1. Identification of date of transition 2. Selection of accounting policies that comply with
IFRSs 3. Preparation of an opening IFRS balance sheet 4. Preparation of the first IFRS financial statements 5. Reconciliations and disclosures
Challenges involved in first time adoptions
1. Fair value override permitted under IFRS 2. Retrospective application 3. Barred – extraordinary items 4. Impact of change in accounting policy 5. The use of revaluation for fixed assets, intangibles and
investment property 6. Consolidation of financials – Special purpose entities 7. Goodwill/negative goodwill treatment 8. Revenue recognition of long term construction contract 9. Impairment of non-current assets 10. Classification of financial instrument
IFRS (Ind-AS) – From India perspective
• Adoption Vs Adapting
• Ind-AS (IFRS) would be applicable into three phases:
• 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, which have a net worth in excess of Rs. 1000 Crore.
• In Phase II it would be applicable w.e.f. 1st April’2013 to the companies whether listed or not, having a net worth exceeding Rs. 500 Crore but not exceeding Rs. 1000 Crore.
• In Phase III it would also be applicable we.f. 1st April 2014,to all the remaining listed companies having net worth less than Rs. 500 Crore.
IFRS Vs Indian Accounting Standards (AS)
• Substance over form
• Fair value
• Current and Non-Current Classification
• Discounting (Time value of money)
• Standards prevail over law
Ind- AS – Current Status
• Near final drafts of Indian Accounting Standards (Ind- AS)- issued by Accounting Standard Board (ASB) on [14th Jan’2011]
• Number coding is aligned with IFRS/IAS
• Schedule VI is under review by MCA
• Income tax Act needs to be changed
Proposed Carve outs – Ind AS Vs IFRS
• Deviations from IFRS (pure carve outs)
• Removal of choices under IFRS
• Optional deviations from IFRS
• Additional guidance under Ind AS where no current guidance is available under IFRS