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Discuss about IFRS


CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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   IFRS (International Financial Reporting Standard)

     Better access to and reduction in the cost of capital raised from global capital markets since IFRS are now accepted as a financial reporting framework for companies seeking to raise funds from most capital markets across the globe. A recent decision by the US Securities and Exchange Commission (SEC) permits foreign companies listed in the US to present financial statements in accordance with IFRS. This means that such companies will not be required to prepare separate financial statements under Generally Accepted Accounting Principles in the US (US GAAP). Therefore, Indian companies listed in the US would benefit from having to prepare only a single set of IFRS compliant financial statements, and the consequent saving in financial and compliance costs.

Why not we discuss about IFRS

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Aditi Kaur (Practising CA)    12 May 2009

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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International Financial Reporting Standards, or IFRS, is the collection of financial reporting standards developed by the standard setting organization. The aim of IFRS is to provide "a single set of high quality, global accounting

From 1973 to 2001, IAS were issued by the International Accounting Standards Committee (IASC). In April 2001 the International Accounting Standards Board (IASB) adopted all IAS and began developing new standards called IFRS. It is noteworthy that an IAS remains in effect unless replaced by an IFRS.

In line of Global Trend, the ICAI has proposed a plan for convergence with IFRS for listed entities, Banks, Insurance etc. with effect from accounting period commence on or after 1 defined as entities with turnover in excess of Rs.1 Billion or borrowing in excess of Rs.250 Million. For Other

standards that require transparent and comparable information in general purpose financial statements.". ‘small and medium sized entities’ (SMEs)), a separate standard for SMEs may be formulate based on the IFRS for Small and Medium-sized Enterprises when finally issued by the IASB, after modifications, if necessary.

 

What is IFRS

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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International Financial Reporting Standards, or IFRS, is the collection of financial reporting standards developed by the International Accounting Standards Board (IASB), an independent, international standard setting organization. The aim of IFRS is to provide "a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements.". From 1973 to 2001, IAS were issued by the International Accounting Standards Committee (IASC). In April 2001 the International Accounting Standards Board (IASB) adopted all IAS and began developing new standards called IFRS. It is noteworthy that an IAS remains in effect unless replaced by an IFRS.
    In line of Global Trend, the ICAI has proposed a plan for convergence with IFRS for listed entities, Banks, Insurance etc. with effect from accounting period commence on or after 1st April 2011. Large Scale entities defined as entities with turnover in excess of Rs.1 Billion or borrowing in excess of Rs.250 Million. For Other ‘small and medium sized entities’ (SMEs)), a separate standard for SMEs may be formulated based on the IFRS for Small and Medium-sized Enterprises when finally issued by the IASB, after modifications, if necessary.

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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Why IFRS

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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1.Globalization and Liberalization     
2.US GAAP
3.Local GAAP
4.Inconsistencies
5.Single Accounting language
6.Increase in foreign Investment
7.Raise Capital Abroad

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Jitendra Jain (Audit and Assurance Division)     11 May 2009

Jitendra Jain
Audit and Assurance Division 
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IFRS is a very vast topic i dont think it is feasibe to discuss about the entire thing in this Popular Discussion Forum

Alternatively what can be done, is people can post queries about IFRS in this discussion.

In Nutshel, IFRS is all about Fair Value based of Accounting...

 

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Pradip Srinivasan (CA Final)     11 May 2009

Pradip Srinivasan
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Thanks for sharing sir

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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 But before asking any thing you have to know abt the ifrs .. in india more than 75% accountant dont know abt the ifrs which is a big problem.. thatswhy on regular basis i am trying to create the IFRS

As you IFRS is all about Fair value than i would like to say you its more than Fair Value.. Substance is very much important in the ifrs in compare to Fair value..

If Fair Value is the heart of IFRS.. Substance is brain

So i suggest every one read abt the ifrs.. every one will enjoy and here i am trying to create awarness and ready to take question .,..

I want active participate from all of you

 

Best Regards

Amit Daga

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )     11 May 2009

CA. Amit Daga
Finance Controller CA. CS. CFA. CIFRS. M.COM.  
 416 likes  8997 points

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    In India, the accounting standards or accounting-related requirements are issued not only by the ICAI (Institute of Chartered Accountants of India) but also by various other regulatory bodies, such as SEBI (Securities and Exchange Board of India), RBI (Reserve Bank of India) and the IRDA (Insurance Regulatory and Development Authority).  They now not only need to be consistent with each other but also with the IFRS. But adoption of IFRS by Indian corporates is going to be very challenging but at the same time could also be rewarding. Indian corporates are likely to reap significant benefits from adopting IFRS. The European Union’s experience highlights many perceived benefits as a result of adopting IFRS. Overall, most investors, financial statement preparers and auditors were in agreement that IFRS improved the quality of financial statements and that IFRS implementation was a positive development for EU financial reporting (2007 ICAEW Report on ‘EU Implementation of IFRS and the Fair Value Directive’).
    There are likely to be several benefits to corporates in the Indian context as well. These are:
§Improvement in comparability of financial information and financial performance with global peers and industry standards. This will result in more transparent financial reporting of a company’s activities which will benefit investors, customers and other key stakeholders in India and overseas;
§The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements. This, in turn, will lead to increased trust and reliance placed by investors, analysts and other stakeholders in a company’s financial statements; and
§Better access to and reduction in the cost of capital raised from global capital markets since IFRS are now accepted as a financial reporting framework for companies seeking to raise funds from most capital markets across the globe. A recent decision by the US Securities and Exchange Commission (SEC) permits foreign companies listed in the US to present financial statements in accordance with IFRS. This means that such companies will not be required to prepare separate financial statements under Generally Accepted Accounting Principles in the US (US GAAP). Therefore, Indian companies listed in the US would benefit from having to prepare only a single set of IFRS compliant financial statements, and the consequent saving in financial and compliance costs.
    However, the perceived benefits from IFRS adoption are based on the experience of IFRS compliant countries in a period of mild economic conditions. The current decline in market confidence in India and overseas coupled with tougher economic conditions may present significant challenges to Indian companies.
 
IFRS requires application of fair value principles in certain situations and this would result in significant differences from financial information currently presented, especially relating to financial instruments and business combinations. Given the current economic scenario, this could result in significant volatility in reported earnings and key performance measures like EPS and P/E ratios. Indian companies will have to build awareness amongst investors and analysts to explain the reasons for this volatility in order to improve understanding, and increase transparency and reliability of their financial statements. This situation is worsened by the lack of availability of professionals with adequate valuation skills, to assist Indian corporates in arriving at reliable fair value estimates. This is a significant resource constraint that could impact comparability of financial statements and render some of the benefits of IFRS adoption ineffective IFRS are principles-based standards, they offer certain accounting policy choices to preparers of financial statements. For example, the use of a cost-based model or a revaluation model in accounting for investment properties. This could reduce consistency and comparability of financial information to a certain extent and therefore reduce some of the benefits from IFRS adoption. In addition to the above, there are several impediments and practical challenges to adoption of and full compliance with IFRS in India. These are:
§The need for a change in several laws and regulations governing financial accounting and reporting in India. In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which financial information is reported or presented in financial statements. For example, the Companies Act, 1956 determines the classification and accounting treatment for redeemable preference shares as equity instruments of a company, whereas these may be considered to be a financial liability under IFRS. The Companies Act (Schedule VI) also prescribes the format for presentation of financial statements for Indian companies, whereas the presentation requirements are significantly different under IFRS. Similarly, the Reserve Bank of India regulates the financial reporting for banks and other financial institutions, including the presentation format and accounting treatment for certain types of transactions.
§The recent announcement by the MCA is encouraging as it indicates government support for the timetable for convergence with IFRS in India. However, the announcement stops short of endorsing the roadmap for convergence and the full adoption of IFRS that is discussed in ICAI’s concept paper. In the absence of adequate clarity and assurance that Indian laws and regulations will be amended to conform to IFRS, the conversion process may not gain momentum.
§ There is a lack of adequate professionals with practical IFRS conversion experience and therefore many companies will have to rely on external advisers and their auditors. This is magnified by a lack of preparedness amongst Indian corporates as this project may be viewed simply as a project management or an accounting issue which can be left to the finance function and auditors. However, it should be noted that IFRS conversion will involve a fundamental change to an entity’s financial reporting systems and processes. It will require a detailed knowledge of the standards and the ability to consider their impact on business transactions and performance measures. Further, the conversion process will need to disseminate and embed IFRS knowledge throughout the organization to ensure its application on an ongoing basis.
§Another potential pitfall is viewing IFRS accounting rules as “similar” to Generally Accepted Accounting Principles in India (Indian GAAP), since Indian accounting standards have been formulated on the basis of principles in IFRS. However, this view disregards significant differences between Indian GAAP and IFRS as well as differences in practical implementation and interpretation of similar standards. Further, certain Indian standards offer accounting policy choices which are not available under IFRS, for example, use of pooling of interests method in accounting for business combinations

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Jitendra Jain (Audit and Assurance Division)     11 May 2009

Jitendra Jain
Audit and Assurance Division 
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I appreaciate your understanding about IFRS, but i still beleive member posting one or two pages on the topic would not encourage crisp reading, i would suggest you to post more one or two liners which would ensure quick and better understanding:

Soemthing like..

IFRS to be mandatory from 2011

Previous year accounts also needs to be restated which would utilmately mean IFRS effective from 2010

Initially only listed companies to comply with IFRS. Also i dont recollect the source but companies having turnover more than 100 crore needs to comply with IFRS.

I would appreciate if Mr Amit and others can further add to the list .

 

 

 


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