IFRS- Basic principles, assumptions, importance, advantages and

disadvantages

Basic principles

International Financial Reporting Standards (IFRS) are a set of accounting rules

for the financial statements of public companies that are intended to make them
consistent, transparent, and easily comparable around the world. The IFRS are
issued by the International Accounting Standards Board (IASB).

IFRS specify in detail how companies must maintain their records and report their
expenses and income. They were established to create a common accounting
language that could be understood globally by investors, auditors, government
regulators, and other interested parties.

The standards are designed to bring consistency to accounting language, practices,

and statements and to help businesses and investors make educated financial
analyses and decisions.

They were developed by the International Accounting Standards Board, which is

part of the not-for-profit, London-based IFRS Foundation. The Foundation says it
sets the standards to “bring transparency, accountability, and efficiency to
financial markets around the world."

IFRS covers a wide range of accounting activities. There are certain aspects of
business practice for which IFRS set mandatory rules.

1
  Statement of Financial Position: This is the balance sheet. IFRS
influences the ways in which the components of a balance sheet are
reported.
 Statement of Comprehensive Income: This can take the form of one
statement or be separated into a profit and loss statement and a statement of
other income, including property and equipment.
 Statement of Changes in Equity: Also known as a statement of retained
earnings, this documents the company's change in earnings or profit for the
given financial period.
 Statement of Cash Flows: This report summarizes the company's financial
transactions in the given period, separating cash flow into operations,
investing, and financing.

IFRS Assumptions

 All the rules, regulations, and guidance provided under IFRS are
based upon four key accounting assumptions. And these
assumptions are:
 Going Concern
The first and foremost assumption is that the sole concept will
guide all number crunching, evaluation, estimation, and recording
that the business or the company will continue its activity. In other
words, the business continues for the foreseeable future, and there
is nothing like business is coming to an end.
 Accrual Basis

2
 This assumption implies that a business will recognize the impact
of transactions as they occur and not when it results in inflow and
outflow of cash. In other words, a transaction happening or an
event is essential rather than the exchange of money, which can
occur in advance or later on.
 Stable Measuring Unit
This assumption implies that all financial transactions and
recording will happen in the common standard currency
consistently across accounting periods. It further directs that a
company will record the assets and liabilities at
their acquisition value or original cost.
 Units of Constant Purchasing Power
This assumption implies a few exceptions to the stable measuring
unit concept in certain situations, such as inflation or deflation

Importance

IFRS Standards strengthen accountability by reducing the information gap

between the providers of capital and the people to whom they have entrusted their
money. Our Standards provide information that is needed to hold management to
account. As a source of globally comparable information, IFRS Standards are also
of vital importance to regulators around the world.

And IFRS Standards contribute to economic efficiency by helping investors to

identify opportunities and risks across the world, thus improving capital allocation.

3
For businesses, the use of a single, trusted accounting language lowers the cost of
capital and reduces international reporting costs.

Advantages

List of the Advantages of Adopting IFRS

1. It would create a single set of accounting standards around the world.

Instead of using multiple accounting standards based on the preference of each
country where an organization does business, adopting the International Financial
Reporting Standards would enable agencies from different segments of the globe to
apply the same standards in every transaction. The advantage to find here is an
increase in transparency, which would then allow for more accessible cross-border
investments. It would decrease the cost of capital while providing higher liquidity
during each transaction.
2. It would reduce the time, effort, and expense of preparing multiple reports.
The presence of International Financial Reporting Standards around the world
would allow organizations to cut down on the amount of time they spend on
preparing their financial statements. There would be fewer costs associated with
this work as well since there would no longer be multiple standards and regulations
to follow based on where the company is doing business each year. Some agencies
would immediately reduce the number of reports they produce from three to just
one each year, saving them more time, labor, and money since there is less work to
do.
3. It would not be a costly
Although one of the disadvantages of adopting IFRS is the one-time cost that
would impact the economy, the actual expense of transitioning to this global

4
standard is minimal. The total cost for the entire economy of the United States
would be approximately $8 billion, which means the average one-time cost to a
multinational company would be $3.25 million. Most agencies would save a lot of
money if they adopted International Financial Reporting Standards because it
would reduce the amount of work it takes to remove errors, meet multiple
regulations, and distribute the information effectively. Over 100 countries so far
have either adopted or are in the process of adopting IFRS right now.
4. It would make it easier to monitor and control subsidiaries from foreign
countries.
Under the current system in the United States, agencies and their subsidiaries must
create parallel reports using GAAP and IFRS, which means there is an increased
risk of error and additional auditing requirements necessary to ensure compliance.
If the International Financial Reporting Standards were to receive adoption in the
U.S., then it would eliminate the potential for misunderstandings. It would help
shareholders and firms to simplify their investment decisions.
5. It would follow the same process that many American agencies already
follow.
Another benefit to consider with the adoption of IFRS is the fact that many
American-based companies doing business overseas are already preparing reports
based on this standard. They are producing a simultaneous GAAP report to satisfy
domestic regulations while meeting the international rules.

Disadvantages

List of the Disadvantages of Adopting IFRS

1. It would increase the cost of implementation for small businesses.

Large businesses would absorb the cost of adopting the International Financial

5
Reporting Standards thanks to their need to produce these reports outside of the
U.S. already. Only small businesses which provide local goods and services would
receive the brunt of this expense since they’d be forced to change as well. Since
there are fewer resources available for SMEs, it would take them more time and
effort to train their staff in this method. This process means that it would be the
sole proprietors, single-person LLCs, and partnerships which would bear the brunt
of this accounting change..
2. It would lead to concerns with standards manipulation.
The flexibility of IFRS can create numerous benefits, but it also creates a
disadvantage with this feature. Organizations can choose to use only the methods
that they wish to incorporate in their reporting, allowing their financial statements
to show the results they desire. This structure makes it easier to incorporate profit
or revenue manipulation into the findings, making it easier to hide financial
problems that might exist.
3. It would require global consistency in auditing and enforcement.
The enforcement of the International Financial Reporting Standards can create
some disadvantages as well. Although the United States has an effective
enforcement policy on its accounting rules, trying to enforce this level of
consistency on other member countries can be challenging. The differences in
political and economic systems works to reduce the amount of comparability
which is available, even if it can improve the efficiency of audits or eliminate
information understanding.
4. It would increase the amount of work placed on accountants.
The implementation of a new system of global accounting standards would require
a complete revision of the domestic accounting processes and strategies. Although
the CFO of each organization would be responsible for this task under most

6
circumstances, the implementation of the new rules would come from the
accounting team. These departments are already busy trying to manage the rules
and regulations that are in place currently, so they would be asked to continue with
their daily work while creating the foundation for this system to receive
implementation too.
When you add in the additional training that many accountants would require to
stay in compliance with the new rules, determining how continuing education
programs would work is an issue that has little clarity at the moment.

5. It would create an adjustment period filled with tumult.

When organizations begin to move from their current accounting standards
mandated by the country of origin to the global accounting rules set by the
International Financial Reporting Standards, then there is an increased risk of
suffering from a costly delay or mistake during the transition period. Since every
country maintains their own complex systems of regulations that govern financial
reporting without direct involvement with the standards in use, there might still be
a requirement to offer multiple reports as well. That means the only difference we
see when adopting IFRS globally is a shift in the presentation of what the agencies
provide.

7
 Developments in various international capital markets in last

three years.

Growth in Financial Intermediation:

The Indian capital market has grown due to innovation of the mechanism of
indirect financing.

This innovation has enhanced the efficiency of flow of funds from ultimate savers
to ultimate users through newly established financial intermediaries like UTI, LIC
and GIC. The LIC has been mobilising the savings of households to build a ‘life
fund’.

It has been deploying a part of ‘life fund’ to purchase the shares and debentures of
the companies. Until 1991 UTI was amongst the top ten shareholders in one out of
every three companies listed in the Stock Exchange in which it had a shareholding.
Likewise, UTI has been mobilising savings of households through the sale of
‘units’ to invest in securities of ‘blue-chip’ companies.

In short, financial intermediaries like LIC, UTI and GIC have activated the growth
process of Indian capital market. It is evident from the rising intermediation ratio.
The intermediation ratio is a ratio of the volume of financial instruments issued by
the financial institutions, i.e., secondary securities to the volume of primary
securities issued by non-financial corporate firms rose from 0.27 during 1951-56 to
0.37 during 1979-80 to 1981-82.

2. Growth in Underwriting of Securities:

The New Issue Market as a segment of capital market can be activated through
institutional arrangements for the underwriting of new issues of securities. During

8
the pre-independence period, the volume of securities underwritten was quite
minimal due to lack of an adequate institutional arrangement for the provision of
underwriting. Stock brokers and banks used to perform this function.

In recent years, the volume and amount of securities underwritten have

tremendously increased owing to increasing participation of specialized financial
institutions like LIC and UTI and the developed banks like 1FC1,1CICI and IDBI
in underwriting activities. It is evident from the fact that the amount of securities
underwritten was only 55 per cent in 1960-61, whereas at present it is about 99 per
cent.

3. Growth in Response to the Offer of Public Issues of Shares and Bonds:

Traditionally investors in India being risk-investors had been reluctant to invest in
shares of public limited companies. Hence, industrial securities as a form of
investment were not popular in India before 1951. However, since 1991 public
response to corporate securities has been improving. But equity-cult has yet to be
developed in rural areas.

It is important to point out that the public response to new issues of shares and
bonds depends upon number of factors such as rates of return on industrial
securities relative to rates of return on non-marketable financial assets and real
assets, government’s monetary policy and fiscal policy and above all legal
protection to investors in recent years.

All the above mentioned factors have contributed to the growth of public response
to new issue of corporate securities. In short, growing response to public issues has
strengthened the Indian capital market. It is evident from the fact that the number
of shareholders rose from 60 lakh in 1985 to 160 lakh in 1994.

9
4. Growth of Merchant Banking:
The role of merchant banking in India’s capital market can be traced back to 1969
when Grind lays Bank established a special cell called the ‘Merchant Banking’.
Since then all the commercial banks have set up the ‘Merchant Banking Division’
to play an important role in the capital market.

The merchant banking division of commercial banks advises the companies about
economic viability, financial viability and technical feasibility of the project. They
conduct the initial ‘spade work’ to find out the investment climate to advise the
company whether the public issue floated would be fully subscribed or under-
subscribed.

The merchant banks in India act as the underwriter as well as the manager of new
issues of securities. The Securities and Exchange Board of India (SEBI) regulates
all merchant banks as far as their operations relating to issue activity are
concerned. To sum up, the emergence of merchant banking has strengthened the
institutional base of Indian capital market.

5. Growth of Credit Rating Agencies:

Of late, credit rating agencies have emerged in the financial sectors. This is an
important development for the growth of Indian capital market. Investment
Information and Credit Rating Agency of India (ICRA) rates bonds, debentures,
preference shares, CDs (Corporate Debentures) and CPs (Commercial Papers).

As Credit Rating Information Services of India Ltd. (CRISIL) is a pioneer in credit

rating, it rates debt instruments of banks, financial institutions and corporate firms.
The credit assessment of companies issuing securities helps in the growth of New
Issue Market segment of the capital market.

10
6. Growth of Mutual Funds:
Mutual funds companies are investment trust companies. Mutual funds schemes
are designed to mobilise funds from individuals and institutional investors, who in
exchange get units which Can be redeemed after a certain lock-in period, at their
Net Asset Value (NAV). The mutual fund schemes provide tax benefits and buy
back facility.

The Unit Trust of India (UTI) can be regarded as pioneer in the setting up of
mutual funds in India. Of late, commercial banks have also launched in India
mutual funds schemes. Can-stock scheme of the Canara bank and LIC’s scheme,
such as Dhanashree, Dhanaraksha and Dhanariddhi are mutual funds schemes.

Since mutual funds schemes help to mobilize small savings of the relatively
smaller savers to invest in industrial securities, so these schemes contribute to the
growth of capital market. The total assets of mutual funds companies increased
from Rs. 66,272 crore in 1993-94 to Rs. 99,248 crore in 2005 and to Rs. 4,13,365
crore in 2008. The investment of mutual funds in the secondary market influences
the share prices in the stock exchange.

7. Stock Exchange Regulation Act:

The growth of capital market would not have been possible had the Government of
India not legislated suitable laws to protect the investors and regulate the Stock
Exchanges. Under this Act, only recognized stock exchanges are allowed to
function. This Act has empowered the Government of India to enquire into the
affairs of a Stock Exchange and regulate it’s working.

The Government of India established the Securities and Exchange Board of India
(SEBI) on April 12, 1988 through an extra ordinary notification in the Gazette of

11
India. In April 1992, SEBI was granted statutory recognition by passing an Act.
Since 1991, SEBI has been evolving and implementing various measures and
practices to infuse greater transparency in the capital market in the interest of
investing public and orderly development of the securities market.

8. Liberalisation Measures:
Foreign Institutional Investors (FII) have been allowed access to Indian capital
market. Investment norms for NRIs have been liberalized, so that NRIs and
Overseas Corporate Bodies can buy shares and debentures, without prior
permission of RBI. This was expected to internationalize Indian capital market.

To sum up, the Indian capital market has registered an impressive growth since
1951. However, it is only since the mid-1980s that new institutions, new financial
instruments and new regularity measures have led to speedy growth of the capital
market. The liberalisation measures under New Economic Policy (NEP) gave a
further boost to the growth of Indian capital market.

12
 Write major highlighting points from the Annual Reports of

IMF, of World Bank like Financing by World Bank to the

Member countries, Regional perspectives etc

Summary:

A recovery is underway, but the economic fallout from the global pandemic could
be with us for years to come. With the crisis exacerbating prepandemic
vulnerabilities, country prospects are diverging. Nearly half of emerging market
and developing economies and some middle-income countries are now at risk of
falling further behind, undoing much of the progress made toward achieving the
UN Sustainable Development Goals.

Sustaining the recovery will require an ongoing policy push, including to secure
and expand access to vaccines and to maintain economic lifelines and targeted
policy support, tailored to the stage of the pandemic, the strength of the economic
recovery, and countries’ structural characteristics. Multilateral cooperation will be
vital to ensure all countries have equitable access to vaccines and financially
constrained economies have adequate access to international liquidity.

As the recovery progresses, economic reforms and public investments in human

capital and green and digital infrastructure should be scaled up to facilitate
resource reallocation and limit long-term scarring. By building toward a more
inclusive, digital, and green future, the world’s economies can achieve higher and
more durable growth.

13
These financial statements are being prepared in the context of the ongoing
COVID-19 pandemic. The pandemic has created severe disruptions in global
economic activity, with many IMF members facing liquidity shortages. The IMF
has responded to the crisis with unprecedented speed and magnitude of financial
assistance, to help countries, notably to protect the most vulnerable and set the
stage for economic recovery. A significant number of countries have benefited
from emergency financing through RFI purchases since the onset of the pandemic.
The IMF has also approved financial assistance under its lending arrangements
and augmented existing lending arrangements to accommodate urgent new needs
arising from the impact of the pandemic

The International Monetary Fund (IMF) said India’s economy is gradually

recovering after it was hit by two Covid waves, but it cautioned the authorities
against inflationary pressures. The agency recommended slow reduction in
monetary policy support as recovery gains ground.

The IMF said while the impact of Covid-19 on investment and human capital

could prolong the recovery and affect medium-term growth, the recovery could
also be faster than expected because of the pace of vaccination and economic
reforms.

In its annual report on India under Article IV, the IMF’s executive board said the
economic outlook remains clouded because of pandemic-related uncertainties
contributing to both downside and upside risks.

“The second wave resulted in another sharp fall in activity, albeit smaller and
shorter and recently high frequency indicators suggest an ongoing recovery,” it
said.

14
It warned that a persistent negative impact of Covid-19 on investment, human
capital, and other growth drivers could prolong the recovery and impact medium-
term growth. While India benefits from favourable demographics, disruption to
access to education and training due to the pandemic could weigh on
improvements in human capital.

However, it said, “faster vaccination and better therapeutics could help contain the
spread and limit the impact of the pandemic”.

Additionally, successful implementation of the announced wide-ranging structural

reforms could increase India’s growth potential, the board said in its report
released on Friday.

It agreed that maintaining an accommodative monetary policy remains

appropriate.

“Looking ahead, a well-communicated plan for a gradual reduction in monetary

15
policy support as the recovery strengthens would foster orderly market
transitions,” it said. The Fund said despite policy support, bank credit growth has
remained subdued even as large corporates have benefited from easier conditions
in capital markets.

The IMF projected India’s economic growth at 9.5 per cent for the current
financial year and the headline consumer price inflation-based inflation at 5.6 per
cent amid elevated price pressures.

It said inflationary pressures have been elevated, yet the rate of price rise eased to
5.6 per cent in July, returning to within the Reserve Bank of India’s (RBI’s)
target, driven by softer food prices and base effects. Since then, the
headline inflation rate fell to 5.3 per cent in August and 4.3 per cent in September,
according to official data.

The Fund said the contraction in economic activity, lower revenue, and pandemic-
related support measures are estimated to have led to a widening of the Centre’s
fiscal deficit to 8.6 per cent of gross domestic product in 2020-21. The general
deficit of both the Centre and the states stood at 12.8 per cent that year.

16
 Report on IMF and World Bank relations with India over last

5 years

The World Bank Group is one of the world’s largest sources of funding and
knowledge for developing countries. Its five institutions share a commitment to
reducing poverty, increasing shared prosperity, and promoting sustainable
development.

17
Together, IBRD and IDA form the World Bank, which provides financing,
policy advice, and technical assistance to governments of developing countries. 
IDA focuses on the world’s poorest countries, while IBRD assists middle-income
and creditworthy poorer countries. 

IFC, MIGA, and ICSID focus on strengthening the private sector in developing

countries.  Through these institutions, the World Bank Group provides financing,
technical assistance, political risk insurance, and settlement of disputes to private
enterprises, including financial institutions.

The IMF works to foster global monetary cooperation, secure financial stability,

facilitate international trade, promote high employment and sustainable economic
growth, and reduce poverty around the world.

The IMF's primary purpose is to ensure the stability of the international monetary

system—the system of exchange rates and international payments that enables
countries and their citizens to transact with each other. It does so by keeping track
of the global economy and the economies of member countries, lending to
countries with balance of payments difficulties, and giving practical help to
members.

The IMF and World Bank collaborate on a routine basis and at many levels to
assist member countries, including joint participation in several initiatives. The
terms for their cooperation were set out in the 1989 concordat and subsequent
frameworks to ensure effective collaboration in areas of shared responsibility.

High-level coordination. During the Annual Meetings of the Boards of

Governors of the IMF and the World Bank, Governors consult and present their
countries’ views on current issues in international economics and finance. The

18
Boards of Governors decide how to address international economic and financial
issues and set priorities for the organizations.

A group of IMF and World Bank Governors also meet as part of the Development
Committee, whose meetings coincide with the Spring and Annual Meetings of the
IMF and the World Bank. This committee was established in 1974 to advise the
two institutions on critical development issues and on the financial resources
required to promote economic development in low-income countries.

Management consultation. The Managing Director of the IMF and the President

of the World Bank meet regularly to consult on major issues. They also issue joint
statements, occasionally write joint articles, and have visited several regions and
countries together. The First Deputy Managing Director of the IMF and the World
Bank Managing Director of Operations also hold regular meetings to discuss
country and policy issues

Collaboration. IMF and Bank staffs collaborate closely on country assistance and

policy issues that are relevant for both institutions. The two institutions often
conduct country missions in parallel and staff participates in each other’s
missions. IMF assessments of a country’s general economic situation and
policies inform the Bank’s assessments of potential development projects or
reforms. Similarly, Bank advice on structural and sectoral reforms informs IMF
policy advice. The staffs of the two institutions also cooperate in specifying the
policy components in their respective lending programs.

The 2007 external review of Bank-Fund collaboration led to a Joint Management

Action Plan on World Bank-IMF Collaboration (JMAP) to further enhance the
way the two institutions work together. Under the plan, Fund and Bank country
teams discuss their country-level work programs, which identify macroeconomic

19
and sectoral issues, the division of labor, and the work needed in the coming year.
A review of Bank-Fund Collaboration underscored the importance of these joint
country team consultations in enhancing collaboration.

To strengthen IMF-WB collaboration at the Board level, joint meetings of

Executive Directors of the two institutions are held once or twice a year to
exchange views and capitalize on the strong complementarities in the two
institutions’ work.

IMF’s Managing Directors in India Christine Lagarde the Managing Director IMF
was in New Delhi to address the students of Lady Shriram College on March 16,
2015 on the subject “Seizing India’s Moment”. This is what she said. “Here is
your country. This is a special moment for India. Just as many countries around
the world are grappling with low growth, India has been marching in the opposite
direction. This year already, India’s growth rate is expected to exceed that of
China, and by 2030, India will overtake China as the most populous country in the
world. The conditions are ripe for India to reap the demographic dividend and
become a key engine for global growth. We look forward to seeing India
becoming even more active on the global stage—in fora such as the G-20 and the
IMF. The IMF is a global multilateral institution where countries like India
deserve a bigger say. We are working precisely on that—on implementing reforms
that would lift India to the top 10 shareholders at the IMF…Today, the elements
are all aligned to make India a global powerhouse. This is India’s moment. Seize
it. Chak De India!” Dominique Strauss Kahn one of the most charismatic
Managing Directors of IMF echoed similar sentiments too. In a 2010 speech at the
FICCI in New Delhi Strauss Khan said the following: “Since my last visit to India
—about three years ago—the world has suffered the worst financial crisis since
the 1930s. India has weathered the crisis remarkably well, thanks in large part to

20
sound macroeconomic and financial policies. Now, India’s growth is amongst the
highest in the world—making it a driving force of the global recovery. India has
traveled a remarkable distance over the last generation. Rapid growth has lifted
hundreds of millions out of poverty. And innovation has put India in the vanguard
of technologically advanced nations. India has truly become an economic
superpower. The time has come for India—and Asia more generally—to play its
rightful role in the global framework of economic governance.” For decades India
had lent its voice to the IMF promoting the values of democracy and liberalism. It
had joined the Fund despite grave reservations from its delegation members at the
Bretton Woods conference in 1944. The IMF was an institution that India had
sustained and helped it grow to the global Institution that it is today. In 2009
India’s committed to invest US$10 billion in IMF notes. The IMF welcomed the
announcement by India’s intention to support the Fund’s lending capacity through
the purchase of up to US$10 billion worth of IMF notes. The Fund said that the
investment will help underpin the international financial system by ensuring the
Fund has adequate resources to meet the financing needs of its membership,
demonstrating the commitment of the Indian authorities to multilateral
cooperation. Creation of IMF – India, an Original Member The United Nations
Monetary and Financial Conference at Bretton Woods in July 1944 witnessed a
consensus between 44 countries for the creation of the International Monetary
Fund and the World Bank. India was represented at the Bretton Woods
Conference by a six-member delegation including the Finance Minister Sir Jeremy
Raisman, the Governor of the Reserve Bank of India Sir C.D. Deshmukh, and Mr.
A.D. Shroff. The Indian delegation made a plea for adequate representation in the
management of the Fund, and a workable agreement with the Government of the
United Kingdom for liquidation of her sterling balances. Mr. A.D. Shroff in his

21
statement at the Bretton Woods Conference said that: “What I ask for is a
multilateral settlement of a portion of our balances. The purpose set out in our
agreement are two: To secure a multilateral convertibility for a reasonable portion
of our balances and secondly to devise a formula so as not to place undue strain on
the resources of the Fund. We have not disguised from the Conference the very
strong feeling in our country on this question. It may be that unfortunately situated
as we are politically, perhaps the big guns in the Conference may not attach great
importance to a country like India. But I am bound to point out this, if you are
prepared to ignore a country the size of India, with four hundred million
population and with natural resources though not fully developed, yet not
incomparable to the natural resources of some of biggest powers on this earth, we
cannot be expected to make our full contribution to the strengthening of the
resources of the Fund. Suppose you don’t accept our position, you are placing us
in a situation, which I may compare to the position of a man with a million-dollar
balance in the bank but not sufficient cash to pay his taxi fare. That is the position
you put us in.”

22
 Write Balance sheet guidelines under IFRS and Indian AS

International Financial Reporting Standards, commonly called IFRS,

are accounting standards issued by the IFRS Foundation and the International
Accounting Standards Board (IASB). They constitute a standardised way of
describing the company's financial performance and position so that company fina
International Financial Reporting Standards, commonly called IFRS, are
accounting standards issued by the IFRS Foundation and the International
Accounting Standards Board (IASB). They constitute a standardised way of
describing the company's financial performance and position so that company
financial statements are understandable and comparable across international
boundaries. They are particularly relevant for companies with shares or securities
listed on a public stock exchange. Financial statements are understandable and

23
comparable across international boundaries. They are particularly relevant for
companies with shares or securities listed on a public stock exchange.

IFRS Standards are required in more than 140 jurisdictions and permitted in many
parts of the world, including South Korea, Brazil, the European U IFRS Standards
are required in more than 140 jurisdictions and permitted in many parts of the
world, including South Korea, Brazil, the European Union, India, Hong Kong,
Australia, Malaysia, Pakistan, GCC countries, Russia, Chile, Philippines, Kenya,
South Africa, Singapore and Turkey.

To assess progress towards the goal of a single set global accounting standards, the
IFRS Foundation has developed and posted profiles about the use of IFRS
Standards in individual jurisdictions. These are based on information from various
sources. The starting point was the responses provided by standard-setting and
other relevant bodies to a survey that the IFRS Foundation conducted. As of
August 2019, profiles are completed for 166 jurisdictions, with 166 jurisdictions
requiring the use of IFRS Standards.

Due to the difficulty of maintaining up-to-date information in individual

jurisdictions, three sources of information on current worldwide IFRS adoption are
recommended:

IFRS Foundation profiles page

The World Bank

24
International Federation of Accountants, India, Hong
Kong, Australia, Malaysia, Pakistan, GCC countries.To assess progress towards
the goal of a single set global accounting standards, the IFRS Foundation has
developed and posted profiles about the use of IFRS Standards in individual
jurisdictions. These are based on information from various sources. The starting
point was the responses provided by standard-setting and other relevant bodies to a
survey that the IFRS Foundation conducted. As of August 2019, profiles are
completed for 166 jurisdictions, with 166 jurisdictions requiring the use of IFRS
Standards.

Due to the difficulty of maintaining up-to-date information in individual

jurisdictions, three sources of information on current worldwide IFRS adoption are
recommended:

 IFRS Foundation profiles page

 The World Bank

 International Federation of Accountants

 Presentation of financial statements

 IFRS financial statements consist of:

 a statement of financial position (balance sheet)

 a statement of comprehensive income. This may be presented as a single

statement or with a separate statement of profit and loss and a statement of
other comprehensive income

 a statement of changes in equity

25
  a statement of cash flows

 notes, including a summary of the significant accounting policies.

 Comparative information is required for the prior reporting period.

 General features

 The following are the general features in IFRS:

 Fair presentation and compliance with IFRS: Fair presentation requires the
faithful representation of the effects of the transactions, other events and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the Framework of IFRS.

 Going concern: Financial statements are present on a going concern basis

unless management either intends to liquidate the entity or to cease trading,
or has no realistic alternative but to do so.

 Accrual basis of accounting: An entity shall recognise items as assets,

liabilities, equity, income and expenses when they satisfy the definition and
recognition criteria for those elements in the Framework of IFRS.

 Materiality and aggregation: Every material class of similar items has to be

presented separately. Items that are of a dissimilar nature or function shall be
presented separately unless they are immateria

 Offsetting: Offsetting is generally forbidden in IFRS= However certain

standards require offsetting when specific conditions are satisfied (such as in
case of the accounting for defined benefit liabilities in IAS 19= and the net
presentation of deferred tax liabilities and deferred tax assets in IAS 12]).

26
  Frequency of reporting: IFRS requires that at least annually a complete set
of financial statements is presented. However listed companies generally
also publish interim financial statements (for which the accounting is fully
IFRS compliant) for which the presentation is in accordance with IAS
34 Interim Financing Reporting.

 Comparative information: IFRS requires entities to present comparative

information in respect of the preceding period for all amounts reported in the
current period's financial statements. In addition comparative information
shall also be provided for narrative and descriptive information if it is
relevant to understanding the current period's financial statements. The
standard IAS 1 also requires an additional statement of financial position
(also called a third balance sheet) when an entity applies an accounting
policy retrospectively or makes a retrospective restatement of items in its
financial statements, or when it reclassifies items in its financial statements.
This for example occurred with the adoption of the revised standard IAS 19
(as of 1 January 2013) or when the new consolidation standards IFRS 10-11-
12 were adopted (as of 1 January 2013 or 2014 for companies in the
European Union).

 Consistency of presentation: IFRS requires that the presentation and

classification of items in the financial statements is retained from one period
to the next unless:

 it is apparent, following a significant change in the nature of the entity's

operations or a review of its financial statements, that another presentation
or classification would be more appropriate having regard to the criteria for
the selection and application of accounting policies in IAS 8; or

27
  an IFRS standard requires a change.

Indian AS

Objective • IND AS 1 describes financial statements as a structured

representation of the financial position and financials performance of an
entity. • Objective of the financial statement is to provide useful information
about the: Financial Position (Assets, Liabilities & equity) Financial
Performance (Income, Expenses including gains and Losses) Cash Flows
(Including Cash Equivalents)

True and Fair View

28
• IND AS 1 requires that financial statements ‘true and fair view of’ the financial
position, financial performance and cash flows of the entity.

• A Presentation of true & fair view requires an entity to select and apply
accounting policies as per IND AS 8.

• Cannot rectify inappropriate policy by disclosure or note

• If management concludes compliance with an IND AS is misleading and

conflicts with objective, departure from that Standard requires Comprehensive
disclosure requirements Only if relevant regulatory framework requires or does not
prohibit Extremely rare

Compliance with IND AS

• IND AS 1

requires an explicit and unreserved statement of compliance with IND AS to be

included in the notes.

• Compliance with all the applicable IND AS’s.

Going Concern

• An entity is a going concern unless: Cease business trading Intends to liquidate or

no realistic alternative but to do so.

• Management shall make an assessment of an entity’s ability to continue as a

going concern

• When financials are not prepared on a going concern basis, the financial
statements should disclose that fact together with the reason why the entity is not
considered as a going concern.

29
Accrual basis of Accounting

• Financial statements (except the statement of cash flows) should be prepared

under the accrual basis of accounting.

• Assets, Liabilities, Equity, Income, and Expenses are recognized only when they
meet the definitions and recognition criteria in the ICAI Framework

Offsetting

• Assets, liabilities, also income and expenses, should not be offset except: When
required or permitted by an IND AS.

• For Example: Revenue recognized is after offsetting trade discounts and

volume rebates. The same is allowed by IND AS. Gains / losses on disposal of
noncurrent assets with selling expenses for same.

Comparative Information

• Numerical comparative information in respect of the previous period should be

disclosed in financial statements unless an IND AS permits/ Requires otherwise.

• Narrative and descriptive comparative information is also required, to understand

the current period’s financial statements.

• Additional comparative information may also be provided voluntarily, say 3rd

P&L

• Reclassify or represent the comparative amounts to conform to the new

presentation or classification

30
31
32