IFRSA Numero-Uno Globally Accepted Accounting

Framework

What is IFRS…

Stands for International Financial Reporting Standards.

In a Broad sense IFRSs includes IASs, However in narrow it relates to only IFRS issued and effective so far.

Till date 30 International Accounting Standards (IAS, now adopted as IFRS), by IAS Committee and 8 IFRS, by IAS Board has been issued and effective.

Also 11 SICs (Standing Interpretation Committee) and 13 IFRICs International Financial Reporting Interpretation Committee has been issued for guidance on IAS and IFRS.

To see the List Please click on these Hyperlink

Convergence of IFRS in India…

Participants (Who will take a part in convergence)۞ ICAI (Institute of Chartered Accountants of India)۞ NACAS (National Advisory Committee on Accounting Standards)۞ Central Government۞ Ministry of Corporate Affairs

The power of issuance of Accounting Standards has been delegated to Central government (but AS issued by ICAI shall be deemed to be issued by Central Government) U/S 211 3(c) of Companies Act, 1956.

NACAS (National Advisory Committee on Accounting Standards) has been established to ensure smooth transition to IFRS by the Ministry of Corporate Affairs, Government, Various Regulators like RBI, SEBI and IRDA.

ICAI will discuss with IASB on the areas required changes, keeping in view the Indian Conditions.

IFRS will apply to Listed Cos., Banks, Insurance Organizations, other Large size Cos. And probably to Level I Enterprises (as defined in preface to Indian Accounting Standards).

Process and Timings of Convergence

ICAI will draft and issue Accounting Standards

IFRS becomes mandatory from accounting period commencing on or after 1st April 2011. (However it is also required to state previous year figures complied with IFRS in Financial Statement as on 31st March 2011. Therefore it is also applicable on Financials as on 31st March 2010).

NACAS will review it and give its node

Central Government will make it effective on the date of notification.

Central Government considers it and make consequential amendments to other Fiscal Laws as in Companies Act Sec 211(3C) will require an amendment initially.

Global Acceptance

۞ In June 2000 European Commission passed a ruling for all listed companies to follow IFRS for preparing CFS.

۞ SEC (Securities Exchange Commission in US) has given a option to Foreign Private Issuers to follow IFRS instead of US GAAP in preparation of Financial Reporting Standards.

۞ SEC is also considering a proposal of treating Foreign and US issuers at par.

۞ In more than 100 Countries, IFRS is required or permitted in preparation and presentation of Financial Statements of Domestic Listed Companies. Moreover in china it will applicable on 1st April 2008 & in Canada it will applicable in 2011.

Permitted/ Required No. of Countries

Required for all 77

Permitted 24

Required (but not for all) 4

Total 105

IFRS Convergence… Benefits and Challenges

Benefits Challenges Access to International Capital

Market, International Money Market without risk premium.

-Lower cost of Capital -Eliminating dual set of Financials

Global Benchmarking and Improved Brand Values

Elimination of Multiple Reports required by stock exchanges

Fair Value approach in valuation of Assets and Liabilities (Recognition of Intangible Assets and Contingent Liabilities)

New and Global Opportunities for professionals (Specially C.A.s).

Shortage of Resources (India with a Population of more than 1 Billion, has only approx. 145K)

Training to be provided to Stakeholders, CFO’s, Auditors, Audit Committee, Analysts, Regulators, Tax Authorities

Information System and communication is required to be altered to adopt the disclosures and presentation of Financials

Fiscal Laws should adopt IFRS (for e-g Deciding Taxability of Unrealized Gains)

Management Compensation, Distributable Profits and Debt Covenants should be valued taking care of new Financials based on IFRS

IASs/IFRSs vis-à-vis Indian GAAPs

IAS/(IFRS) No. & Title Indian GAAP No. & Title1. Presentation of Financial

Statements1. Disclosure of Accounting

Policies

2. Inventories 2. Valuation of Inventories

Corresponding IAS has been withdrawn since the matter is now covered by IAS 16 and IAS 38

6. Depreciation Accounting

7. Cash Flow Statements 3. Cash Flow Statements

8. Accounting Policies, Changes in Accounting Estimates and Errors

5. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

10. Events After the Balance Sheet Date

4. Contingencies and Events Occurring after the Balance Sheet Date

11 Construction Contracts 7 Construction Contracts

IASs/IFRSs vis-à-vis Indian GAAPs

IAS/(IFRS) No. & Title Indian GAAP No. & Title12. Income Taxes 22. Accounting for Taxes on

Income

14. Segment Reporting 17. Segment Reporting

16. Property, Plant and Equipment 10. Accounting for Fixed Assets

17. Leases 19. Leases

18. Revenue 9. Revenue Recognition

15. Employee Benefits 19. Accounting for Retirement Benefits in the Financial Statements of Employers (recently revised and titled as 'Employee Benefits')

20. Accounting for Government Grants and Disclosure of Government Assistance

12. Accounting for Government Grants

21. The Effects of Changes in Foreign Exchange Rates

11. The Effects of Changes in Foreign Exchange Rates

IASs/IFRSs vis-à-vis Indian GAAPs

IAS/(IFRS) No. & Title Indian GAAP No. & Title23. Borrowing Costs 16. Borrowing Costs

24. Related Party Disclosures 18. Related Party Disclosures

27. Consolidated and Separate Financial Statements

21. Consolidated Financial Statements

28. Investments in Associates 23. Accounting for Investments in Associates in Consolidated Financial Statements

31. Interests in Joint Ventures 27. Financial Reporting of Interests in Joint Ventures

33. Earnings Per Share 20. Earnings Per Share

34. Interim Financial Reporting 25. Interim Financial Reporting

36. Impairment of Assets 28. Impairment of Assets

37. Provisions, Contingent Liabilities and Contingent Assets

29. Provisions, Contingent Liabilities and Contingent Assets

IASs/IFRSs vis-à-vis Indian GAAPs

IAS/(IFRS) No. & Title Indian GAAP No. & Title38. Intangible Assets 26. Intangible Assets

Corresponding IAS has been withdrawn since the matter is now covered by IAS 32, 39 and 40

13. Accounting for Investments

40. Investment Property Dealt with by Accounting Standard 13

(3.)

(Business Combinations) 14. Accounting for Amalgamations

(5.)

(Non-current Assets Held for Sale and Discontinued Operations). Recently issued and withdrew IAS 35

24. Discontinuing Operations2 Further, As 10 deals with accounting for fixed assets retired from active use.

*Only 3 AS (AS 15, 30 & 31) are in line with IFRS so far.

Other IASs / IFRSs

۩ Corresponding to IFRS 6, Exploration for and Evaluation of Mineral Resources, Guidance Note of the ICAI titled ‘Accounting for Oil and Gas Producing Activities’, has been issued.

۩ Some IAS/IFRS are not considered relevant for issuance of either Accounting Standards or the Guidance Notes by the ICAI.Standards ReasonsIAS 29, Financial Reporting in Hyper-inflationary Economies Hyper-Inflationary conditions do not prevail in

India IFRS 1, First-time Adoption of IFRSs IFRSs are not being adopted till

date

۩ Relevant ASs are under preparation relevant to following IASs/IFRSs :-IAS 26 Accounting and Reporting by Retirement Benefit PlansIAS 32 Financial Instruments: Disclosure and PresentationIAS 39 Financial Instruments: Recognition and Measurement*IAS 41 AgricultureIFRS 2 Share Based Payments (Covered by Guidance Notes)

IFRS 4 Insurance ContractsIFRS 7 Financial Instruments: Disclosure

Abhishek K. GargChartered Accountant

+919818772279abhishek.garg@honeywell.com

Honeywell International India (P) Ltd.

List of IASs (Issued and Effective)

No. Title No. Title 1* Presentation of Financial

Statements2 Inventories

7 Cash Flow Statements 8 Accounting Policies, Changes in Accounting Estimates and Errors

10 Events after Balance Sheet Date

11 Construction Contracts

12 Income Taxes 14 Segment Reporting

16 Property, Plant and Equipment

17 Leases

18 Revenue 19 Employee Benefits

20 Accounting for Government Grants and disclosure of Government Assistance

21 The Effect of Changes in Foreign Exchange Rates

23* Borrowing Cost 24 Related Party Disclosure

26 Accounting and Reporting by Retirement Benefit Plan

27 Consolidated and Separate Financial Statements

Continue to…

List of IASs (Issued and Effective)

No. Title No. Title28 Investments in Associates 29 Financial Reporting in

Hyperinflationary Economies

31 Interest in Joint Ventures 32 Financial Instruments: Presentation

33 Earning Per Share 34 Interim Financial Reporting

36 Impairment of Assets 37 Provisions, Contingent Liabilities and Contingent Assets

38 Intangible Assets 39 Financial Instruments: Recognition and Measurement

40 Investment Property 41 Agriculture

*Revised standards has been issued and applicable from accounting period commencing on or after 1st January 2009.

** IAS 3,4,5,6,9,13,15,22,25,30 & 35 have been withdrawn.

List of IFRSs (Issued and Effective)

No. Title1 First Time Adoption of International Financial Reporting

Standards

2 Share Based Payment

3 Business Combinations

4 Insurance Contracts

5 Non Current Assets Held for Sale and Discontinued Operations

6 Exploration for and Evaluation of Mineral Resources

7 Financial Instruments: Disclosure

8 Operating Segments

List of SICs (Issued and Effective)

No. Title7 Introduction of Euro

10 Government Assistance- No Specific Relation to Operating Activities

12 Consolidation- Special Purpose Entities

13 Jointly Controlled Entities- Non-Monetary Contributions by Ventures

15 Operating Leases- Incentives

21 Income Taxes- Recovery of Revalued Non-Depreciable Assets

25 Income Taxes- Changes in Tax Status of an Entity or its Shareholders

27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease

29 Disclosure: Service Concession Agreements

31 Revenue- Barter Transactions Involving Advertising Service

32 Intangible Assets- Website Costs

List of IFRICs (Issued and Effective)

No. Title1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities

2 Member’s Share in Co-operative Entities and Similar Instruments

4 Determining whether an Arrangement contains a Lease

5 Rights to Interest arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

6 Liabilities arising from Participating in a Specific Market-Waste Electrical and Electronic Equipment

7 Applying the Restatement Approach under IAS 29

8 Scope of IFRS 2

9 Reassessment of Embedded Derivatives

10 Interim Financial Reporting and Impairment

11 IFRS 2- Group and Treasury Share Transactions

12 Service Concession Arrangements

13 Customer Loyalty Programmes

14 IAS 19- The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Meaning of Level I Enterprises

Means an Enterprises which satisfy one or more of following conditions:

Listed or in the process of listing whether in india or outside india.

Banks, Financials Institution, Enterprises carrying on Insurance Business

All Commercial , Industrial and Business Reporting Enterprises having turnover more than Rs.50 Crores or borrowings more than Rs.10 Crores in Preceding accounting period.

Holding and subsidiary of any one of the above, at any time during the accounting period.