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Q1. What are the primary differences with IFRS?








Q2. What is advantage India in whole process?

That is what one refers as GLOBAL vs LOCAL

Quite a lot

1.  India aims to emerge as a developed country. On the path of globalization, it is essential for competing globally.

2.  The interest rates and therefore finance costs in India makes entrepreneurship very challenging and uneconomical. Japan-like countries have negative interest rates. ‘FRS should substantially help us to get global investments.

3.  For any FII a balance-sheet (financial position) in a global format will always be trustworthy.

Q 3. What is substance in IFRS?

Presently we are bogged down with legal and regulatory forins. They do not serve the purpose of bringing out real intentions of transactions. We would call it as “lifting of “form” veil which is analogical to lifting of corporate veil. A few examples are quoted below.

1.  A subsidized loan given to employee tinount to employee cost to the extent of portion of interest instead of reducing finance income.

2.  Loans issues at discount and repayable at premium essentially are elements of finance cost in substance but presently by format of same, they are classified as premiums or discounts.

3.  Slow-moving inventory results into making an asset which is non-current, whereas present ‘form’ aspect, forces us to classify it as current asset.

4.  Convertible debentures are actually in for getting ownership but still by ‘form’ they get a place in ‘debt’ at present.

All these artificial accounting is challenged and denied by IFRS.

Instead of legal agreements becoming source of accounting, it is the real “A” “counting” (Accounting) spirit which will matter.

Q4. Why groups matter in accounting?

This is another case of form. Legally the organizations create different entities ‘an(I many evils like

1.     Off balance-sheet assets — operating vs finance leases etc

2.     Transfer of receivables — with/without recourse

3.     Complex structures

4.     Transfer of profits convenient to taxation

Makes accounts and financial positions deceptive and real purpose is not served at all.

IFRS attacks it, by simply refusing to accept standalone concept. It makes group’s financial position disclosure compulsory.

Presently in India, it is only listed companies which are required to present consolidated accounts. That too consolidating companies only, which are subsidiaries. There emanates next greatness of IFRS

Q 5.  What is Entity vs Company aspect?

The subsidiary company is replaced by controlled entity. An entity will mean every entity whether individual, partnership, trust, society, AOP, BOI, IIUF etc. A subsidiary is defined by a ‘form’ which refers to above 50% voting power that too in a company only. Or else right to appoint or remove majority directors.

This is simply allowing entities which are though controlled to simply escape from consolidations. IFRS therefore ensures all entities are covered under consolidation. Similarly, the control is definitely possible even without voting powers or formal control over board thru what can be called as commercially cornering, thru a contract by simply capturing all financial and operating decision-making powers. So despite being control, an entity can escape consolidations. IFRS directly attacks it thru a controlled entity concept.

Q 6.  What is PRINCIPLES vs RULES?

Rule books make simply everything aiming towards escape mechanism. E.g. creeping ‘acquisitions are made by acquiring 14.85% and be below the exact line of 15%. Intentions are so direct that the rule-books become a mockery That is where 1FRS gets into spirit and ensures that quantified rule-books do not make lawyers to rule by finding exceptions and escape routes. Corporate governance is aimed at thru a very clear principle based structure. Luckily. Indian GAAP is much less prone to rules than what USA is. So the advantage of principles over rules is more seen for US companies by adopting IFRS.

Q 7.  What is FAIR who decides?

Fair value has become one of the most debatable issue in IFIZS. One needs to appreciate that Fair value concept is a subjective one. However, historical costs lead to no reflection of financial position of a company. Let us ask a simple question. If balance sheets are disclosing financial positions, at least reasonably true and fair, then why any merger or acquisition or takeover, hiving off, carving out requires a professional N’aluation. Time has come to use fairly well-established valuation methods and principles, so as to adopt FAIR VALUE concept and give up historical costs.

Q 8.  What is balance-sheet approach IFRS propagates?

It is established that with proper stock market functioning, the financial position has to fulfill needs of present as well as future investors. The current thrust on P & L only makes present investors happy incl thereby professionalism never sets in. P & L showing rosy pictures and equity worth going down thru direct balance-sheet adjustments has become a common scenario. IFRS focuses on equity holders worth and calls for changes in equity as prime indicator of variation in financial position.

So lightly speaking, the present accountant calculates and focuses on P & L and puts difference to BALANCE-SHEET and ensures that it tallies.

IFRS on other hand, rightly uses various principles like principles, controlled entity, fair value of assets and liabilities and treats variation in assets and liabilities during the period as variation in equity shareholders worth and takes the difference to P & L and thereby disallows P & L manipulation by accounting for all balance-sheet differences.


By Rammohan N. Bhave, Limca record holder on IFRS, CA, CMA, CS, LL. B. (G). Dip IFRS London, Certified IFRS, ICAI and Six Sigma Green Belt


To signup for an IFRS course by Ram Mohan Bhave click here.


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