Introduction to ifrs and convergence
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The document provides an introduction to International Financial Reporting Standards (IFRS) and India's convergence with IFRS. It discusses the history and development of IFRS, the composition of IFRS, and India's roadmap for convergence, including the timeline for listed companies to converge accounting standards with IFRS from 2011 onwards. It also addresses some of the challenges and benefits of convergence for India.
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Introduction to ifrs and convergence
- 1. INTRODUCTION TO IFRS AND CONVERGENCE N R GOVINDARAJAN FCA,AICWA,DISA,CISA
- 2. AS in India IAS formulated through IASC in 1973 India decides to formulate Accounting Standards in 1977 Base approach is IAS with local laws, customs and business environment considered Initially recommendatory and later made mandatory
- 3. AS in India Legal recognition in 1999 Other regulatory bodies also insist on AS Recent notification - AS rules 2006 Gap bridging exercise started in 2000 Several new Accounting Standards introduced Introduction of new accounting concepts
- 4. What is IFRS? It is an accounting frame work which has world wide acceptance Developed by a body called IASB Prior to that there was a body called IASC and in 2001 it was replaced by IASB Hence all the IAS issued by the IASC and the new ones issued by IASB are collectively called IFRS
- 5. What is IFRS? Till date IASB has so far issued 30 IAS and 8 IFRS In More than 100 countries either IFRS is required or permitted India does not follow IFRS but has its own GAAP which is more in tune with IFRS and has now amended its GAAP to fine tune with IFRS
- 6. The Composition of IFRSs IFRSs comprise of : International Financial Reporting Standards International Accounting Standards and Interpretations originated by the International Financial Reporting Interpretations Committee( IFRIC) Standing Interpretations Committee ( SIC). As of date, there are – 8 International Financial Reporting Standards (IFRS) , 29 International Accounting Standards ( IAS) , 17 IFRIC interpretations and 11 SIC interpretations
- 7. Consequences of convergence Not a mere technical exercise Preparatory exercise is needed before the change happens Big change is expected in the ratios of entities Has an impact on investors, analysts and bankers
- 8. Transition to IFRS India to converge with IFRS from 01 04 2011 as announced by ICAI Globally the momentum is towards convergence of AS and good quality of financial reporting No need for translation Better comparison and transparency Eliminates multiple reporting and helps in understanding of foreign investors who do not have knowledge of Indian accounting standards
- 9. Need for convergence Cross border transactions facilitation Improved foreign investments Availability of relevant and comparable information Professional scope widen and mobility improved Increased industrial growth
- 10. Need for convergence Removal of information and capital flow barriers Out of 40,000 companies listed in 51 stock exchanges worldwide, 2700 were cross border listings in Oct 2006 New financial instruments , complexity and diversified accounting practices Consolidation constraints
- 11. Constraints Resources Equipping the industry and professionals Information systems challenges Tax implications Impact on performance indicators Effect on profits and its distribution Managerial remuneration and impact
- 12. Convergence of AS with IFRS Questions before India Is a convergence required? Any other option or alternative available? What is the cut off date? Adoption or convergence? Constitution of task force Concept paper submitted Road map laid
- 13. IFRS and Indian road map Regulators have decided to converge AS with IFRS from accounting period commencing from 01 04 2011 Phased implementation of convergence It would be for listed companies, banks, insurance and other large corporates ICAI expects smooth transition to IFRS by training its members so that they would be fully equipped to meet the challenges that lie ahead
- 14. Date line IFRS CONVERGENCE ..\..\..\IFRS DATE LINE 2010\DATE LINE IFRS FEB 10.pdf BANKS AND INSURANCE
- 15. Key conceptual differences Proposed dividend Historical cost vs Fair value Depreciation rates Concept of control Preference shares Decommissioning cost Business combinations
- 16. Conclusion Speedy approval of converged standards AND notification Saral Schedule VI Amendments to Companies Act Speed mismatch between IASB and Indian regulators