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 Foundatio
n)
.

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 SME’s 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 First time Adoption of International Financial Reporting Standards

IFRS-2 Share-based payments

IFRS-3 Business Combinations

IFRS-4 Insurance Contracts

IFRS-5 Non Current Assets held for sale and Discontinued Operations

IFRS-6 Exploration for and evaluation of Mineral Resources.

IFRS-7 Financial Instruments-Disclosures

IFRS-8 Operating Segments

 Introduction to IFRS
LIST OF IASs

1. IAS 1 Presentation of Financial Statements

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

16. IAS 26 Accounting and Reporting by Retirement Benefit Plans.

17. IAS 27 Consolidated and Separate Financial Statements
18. IAS 28 Investments in Associates
19. IAS 29 Financial Reporting in Hyperinflationary Economies
20. IAS 31 Interests in Joint Ventures
21 IAS 32 Financial Instruments : Presentation
22. IAS 33 Earnings per Share
23. IAS 34 Interim Financial Reporting
24. IAS 36 Impairment of Assets
25. IAS 37 Provisions, Contingent Liabilities and Contingent Assets
26. IAS 38 Intangible Assets
27. IAS 39 Financial Instruments : Recognition and Measurement
28. IAS 40 Investment Property
29. IAS 41 Agriculture
 Introduction to IFRS
List of IFRIC Interpretations as on 30.11.2009

1. IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

2. IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments
3. IFRIC 4 Determining Whether an Arrangement Contains a Lease
4. IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
5. IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and
Electronic Equipment
6. IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies
7. IFRIC 8 Scope of IFRS 2 *
8 IFRCI 9 Reassessment of Embedded Derivatives
9. IFRIC 10 Interim Financial Reporting and Impairment
10 IFRIC11* IFRS 2: Group and Treasury Share Transactions
11. IFRIC 12 Service Concession Arrangements
12. IFRIC13 Customer Loyalty Programme
13. IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements an
their Interaction
14. IFRIC 15 Agreement for the Construction of Real Estate
15 IFRIC 16 Hedges of Net investments in a Foreign Operation
16 IFRIC 17 Distribution of Non Cash Assets to Owners
17. IFRIC 18 Transfer of Assets from Customers

* 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. SIC 7 Introduction of the Euro

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