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The document discusses International Financial Reporting Standards (IFRS). It provides definitions of IFRS, why standards are changing to IFRS, benefits and challenges. Key points include that IFRS are principle-based global standards applicable to all profit-oriented entities, globalization is driving adoption of IFRS, and benefits include increased comparability, investor confidence while challenges include increased costs and transition difficulties.

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45 views15 pages

Afm

The document discusses International Financial Reporting Standards (IFRS). It provides definitions of IFRS, why standards are changing to IFRS, benefits and challenges. Key points include that IFRS are principle-based global standards applicable to all profit-oriented entities, globalization is driving adoption of IFRS, and benefits include increased comparability, investor confidence while challenges include increased costs and transition difficulties.

Uploaded by

abcd dcba
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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 What is IFRS?

 Why IFRS?
 Benefits and challenges.
 Purpose change in accounting standards.
 IFRSs are high quality, understandable and enforceable global
accounting standards
 Applicable to all financial statements reporting of all profit- oriented
entities.
 IFRS are ‘principle based’ accounting standards
 A separate set of IFRS for Small and Medium-sized Enterprises has
been issued by the IASB in July 2009.
 International Financial Reporting Standards comprise of:
 International Financial Reporting Standards (IFRS) - standards issued after
2001
 International Accounting Standards (IAS) - standards issued before 2001
 Interpretations originated from the International Financial Reporting
Interpretations Committee (IFRIC) – issued after 2001
 Standing Interpretations Committee (SIC) - issued before 2001
 Globalization is the primary force behind the spread of IFRS
 To bring about convergence of national accounting standards and
International Accounting standards and IFRS to high quality
standards.
 A statement of financial position as at the end of the period
 A statement of comprehensive income for the period
 A statement of changes in equity for the period;
 A statement of cash flows for the period;
 A notes, comprising a summary of significant accounting policies,
and other explanatory information; and
 A comparative statement of financial position
 Increasing growth of international business
 International investing and thereby lead to more foreign
capital inflows into the country
 Comparability between financial statements of various
companies across the globe
 Level of confidence to investors
 Reduce cost of compliances
 Professional opportunities to serve international clients
 Risk Evaluation
 Awareness about international practices
 Training
 Increase in initial cost and IT systems
 Comply with the Companies Act, 1956,Income Tax Act, 1961,
SEBI, RBI, etc
 Training to stakeholders, employees, auditors, regulators, tax
authorities, etc needed
 Differences between Indian GAAP and IFRS may impact business
decision financial performance of an entity
 Limited pool of trained resource and persons having expert
knowledge on IFRS
 Management compensation plan
 Taxation
 Fair Value
 IFRS 1: First time Adoption of International Financial
Reporting Standards
 IFRS 2: Share based Payment
 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
 Permanent Differences

 Timing Differences

 Fair Value

 Converging Balance sheet gain/loss


Presentation Recognition/ Disclosure
Measurement

IAS 32 IAS 39 IFRS 7


 IAS 32, following items are not financial instruments
 Physical Assets
 Assets such as pre-paid expenses
 Deferred revenue expenses
 Recognition of financial instruments
 Carrying amount of the liability component is determined first
 Carrying amount of the equity instruments, with the option to
convert the instrument into ordinary shares

Proceeds of - Carrying amount = Carrying amount


Issue of liability of equity
component instrument
 IAS 39, financial assets to be classified in one of the below 4
categories
 Financial assets at fair value through profit and loss
 Loans and receivables
 Held to maturity investments
 Available for sale financial assets
 If the initial application of an accounting standard mandates that a business
change an accounting policy, account for the change under the transition
requirements stated in the new standard. When there are no transition
requirements that accompany an accounting standard, apply the change
retrospectively. Retrospective application means that the accounting records be
adjusted as though the new accounting policy had always been in place, so that
the opening equity balance of all periods presented incorporates the effects of
the change.

 There are cases where it may be impracticable to determine the retrospective


effect of a change in accounting policy. If so, apply the new policy to the
carrying amounts of affected assets and liabilities as of the beginning of the
earliest period to which the policy can be applied, along with the offsetting
equity account. If the effect of a policy change cannot be determined for any
prior period, then do so from the earliest date on which it is practicable to
apply the new policy. When making policy changes, adjust all other affected
information in the notes that accompany the financial statements.

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