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Overview of IFRS

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									Overview of IFRSs-
  Global GAAPs
 CA. Charanjot Singh Nanda
   What is accounting?
   What is a standard?
   What is a accounting standard?

   What is GAAP?
   How Many types of International accounting
    standards are there ?
   How many types of GAAPs are there?

                IFRS- Meaning
   both a narrow and a broad meaning.
   Narrowly, IFRSs refers to the new numbered series of
    pronouncements that the IASB is issuing, as distinct
    from the International Accounting Standards (IASs)
    series issued by its predecessor.
   More broadly, IFRSs refers to the entire body of IASB
    pronouncements, including standards and
    interpretations approved by the IASB and IASs and
    SIC interpretations approved by the predecessor
    International Accounting Standards Committee.

     Bodies Associated with IFRS
   International Accounting Standard Board
       Based in London.
       Formed in 2001.
       Funded by IASC Foundation
       Consist of 14 members
       overseen by the 22 Trustees of the International Accounting Standards
        Committee (IASC) Foundation.
   Standards Advisory Council
       Advises IASB
       Comprises 40 members
   International Financial Reporting Interpretation Committee
       Established in March 2002
       Replaced Standing Interpretation Committee
       Assists IASB
       Fourteen Voting Members
      Contents of IFRS Literature
   Preface to IFRS
   Framework for the Preparation and Presentation
    of Financial Statements
   37 : Main Standards i.e. 8 IFRS + 29 IAS
   26 Interpretations i.e. 15 IFRIC + 11 SIC
    [IFRIC 3 withdrawn in June 2005]

                      Need for IFRS
A single set of accounting standards would enable internationally
 to standardize training and assure better quality of accounting
 it would also permit international capital to flow more freely
 enabling companies to develop consistent global practices on accounting
 It would be beneficial to regulators as a complexity associated with
   needing to understand various reporting regimes would be reduced.
 Enhance comparability between financial statements of various
   companies across the globe
 Reduce time and resources required to prepare different set of accounts
   for companies listed in various exchanges of the world and for
   companies having global group companies.

                  Objective of IFRS
   to develop, in the public interest, a single set of high quality,
    understandable and enforceable global accounting standards that
    require high quality, transparent and comparable information in
    financial statements and other financial reporting to help
    participants in the world's capital markets and other users make
    economic decisions;
   to promote the use and rigorous application of those standards;
   to take account of the special needs of small and medium-sized
    entities and emerging economies.
   to bring about convergence of national accounting standards
    and International Accounting standards and IFRS to high quality

                       Scope of IFRS
1.   IASB Standards are known as International Financial Reporting Standards
     (IFRSs). All International Accounting Standards (IASs) and Interpretations
     issued by the former IASC (International Accounting Standard Committee)
     and SIC (Standard Interpretation Committee) continue to be applicable
     unless and until they are amended or withdrawn.
2.   IFRS set out recognition, measurement, presentation and disclosure
     requirements of transaction and events in general purpose financial
3.   IFRSs apply to the general purpose financial statements and other financial
     reporting by profit-oriented entities -- those engaged in commercial,
     industrial, financial, and similar activities, regardless of their legal form.
4.   Entities other than profit-oriented business entities may also find IFRSs

                        Scope …….
5.   General purpose financial statements are intended to meet the
     common needs of shareholders, creditors, employees, and the
     public at large for information about an entity's financial
     position, performance, and cash flows.
6.   Other financial reporting includes information provided outside
     financial statements that assists in the interpretation of a
     complete set of financial statements or improves users' ability to
     make efficient economic decisions.
7.   IFRS apply to individual company and consolidated financial
8.   A complete set of financial statements includes a balance sheet,
     an income statement, a cash flow statement, a statement
     showing either all changes in equity or changes in equity other
     than those arising from investments by and distributions to
     owners, a summary of accounting policies, and explanatory
                    Scope …………..
9. If an IFRS allows both a 'benchmark' and an 'allowed alternative' treatment,
   financial statements may be described as conforming to IFRS whichever
   treatment is followed.

10. In developing Standards, IASB intends not to permit choices in accounting
    treatment. Further, IASB intends to reconsider the choices in existing IASs
    with a view to reducing the number of those choices.

11. IFRS will present fundamental principles in bold face type and other guidance
    in non-bold type (the 'black-letter'/'grey-letter' distinction). Paragraphs of
    both types have equal authority.

12. IAS 1 provides that, the conformity with IAS requires compliance with every
    applicable IAS and Interpretation requires compliance with all IFRSs as well.

          IASB Framework

                          Objectives of
                      financial statements

                                           Qualitative characteristics of IAS
Capital and                                      financial statements
capital maintenance

                        Elements of the
                        financial statements
   The IASB Framework was approved by IASC Board in April,
    1989 for publication in July 1989, and adopted by the IASB in
    April, 2001.
   The framework :
   Defines the objective of financial statements;
   Identifies the qualitative characteristics that make
    information in financial statements useful; and
   Defines the basic elements of financial statements and
    the concepts for recognising and measuring them in
    financial statements

                     LIST OF IFRS
1.   IFRS 1 First-time Adoption of International Financial Reporting
2.   IFRS 2 Share-based Payment
3.   IFRS 3 Business Combinations
4.   IFRS 4 Insurance Contracts
5.   IFRS 5 Non-current Assets Held for Sale and Discontinued
6.   IFRS 6 Exploration for and evaluation of Mineral Resources
7.   IFRS 7 Financial Instruments: Disclosures
8.   IFRS 8 Operating Segments

     International Accounting standards
1.    IAS 1  Presentation of Financial Statement
2.    IAS 2  Inventories
3.    IAS 7  Statement of Cash Flow
4.    IAS 8  Accounting policies, Changes in Accounting
             Estimates and Errors
5.    IAS 10 Events after Reporting Period
6.    IAS 11 Construction Contracts
7.    IAS 12 Income Tax
8.    IAS 16 Plant, Property and Equipment
9.    IAS 17 Leases
10.   IAS 18 Revenue
11.   IAS 19 Employee Benefits

12.   IAS 20 Accounting for Government Grants and Disclosure of
      Government Assistance
13.   IAS 21 The Effect of Change in Foreign Exchange Rates
14.   IAS 23 Borrowing Costs
15.   IAS 24 Related Party Disclosures
16.   IAS 26 Accounting and Reporting by Retirement Benefit Plans
17.   IAS 27 Consolidated and Complete Financial Statements
18.   IAS 28 Investment in Associates
19.   IAS 29 Financial Reporting in Hyper Inflationary Economies
20.   IAS 31 Interest in Joint Venture

21.   IAS 32   Financial Instrument: Presentation
22.   IAS 33   Earning per Share
23.   IAS 34   Interim Financial Reporting
24.   IAS 36   Impairment of Assets
25.   IAS 37   Provisions, Contingent Liability and Contingent
26.   IAS 38   Intangible Assets
27.   IAS 39   Financial Instrument: Recognition and Measurement\
28.   IAS 40   Investment Property
29.   IAS 41   Agriculture

                 Index of Interpretations
IFRIC 1    Changes in Existing Decommissioning, Restoration and Similar Liabilities

IFRIC 2    Members’ Share in Co-operative Entities and Similar Instruments

IFRIC 4    Determining whether an Arrangement contains Lease

IFRIC 5    Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation
IFRIC 6    Liabilities arising from Participation in a Specific Market- Waste Electrical and Electronic
IFRIC 7    Applying restatement approach under IAS 29

IFRIC 8    Scope of IFRS 2

IFRIC 9    Reassessment of Embedded Derivative

IFRIC 10   Interim Financial Reporting and Impairment

IFRIC 11   IFRS 2- Group and Treasury Share Transaction

IFRIC 12   Service Concession Arrangements
IFRIC 13   Customer Loyalty Programmes
   Index of Interpretations……..
IFRIC 14   IAS 19- The Limit on a Defined Benefit Asset, Minimum
           Funding Requirement and their Interaction
IFRIC 15   Agreements for the Construction of Real Estate
IFRIC 16   Hedges of a Net Investment in a Foreign Operation

         Index of Interpretations……..
SIC 7    Introduction of the EURO
SIC 10   Government Assistance- No Specific Relation to Operating Activities
SIC 12   Consolidation- Special Purpose Entities
SIC 13   Jointly Controlled Entities- Non Monetary Contribution by Venturers
SIC 15   Operating Lease- Incentives
SIC 21   Income Taxes- Recovery of Revalued Non Depreciable Assets
SIC 25   Income Taxes- Change in Tax Status of an Entity or its Shareholders
SIC 27   Evaluating the Substance of Transaction Involving the Legal Form of a Lease
SIC 29   Service Concession Arrangements: Disclosures

SIC 31   Revenue: Barter Transaction Involving Advertising Services
SIC 32   Intangible Assets- Web Site Costs
                       KEY DATA
   Totals for Listed Companies, for 162 jurisdictions:
   IFRSs not permitted —                                  34
   IFRSs permitted —
   IFRSs required for some —                               4
   IFRSs required for all —                               85 *
   No stock exchange —                                    15
    *Includes 30 EU/EEA member states and 4 jurisdictions that
    have adopted full IFRS equivalents

                   KEY DATA…
Of the 113 jurisdictions (24 + 4 + 85) that permit or require IFRSs
 In 80 jurisdictions the audit report refers to conformity with
 In 30 jurisdictions the audit report refers to conformity with
  IFRSs as adopted by the EU
 In 1 jurisdiction (NZ) the audit report refers to local GAAP or
  to IFRSs as adopted in the jurisdiction
 In 1 jurisdiction (HK) the audit report for some companies
  refers to local GAAP and for other companies it refers to IFRSs
 For 1 jurisdiction (Brazil) we do not have this information

   Australia, New Zealand, China, Singapore, Japan, Middle East,
    Africa and the European Union have either adopted or are
    converging to IFRS.
    The eminent status to IFRS came about after the EU made it
    mandatory for all its listed companies starting 2005.
    Consequently, more than 8,000 EU-listed companies adopted
    IFRS in one go.
   US capital markets are losing their attractiveness as a result of what
    many view as excessive regulation. As a consequence, many believe
    that the predominance of US GAAP as a standard may be coming
    to an end. This could make large companies look at other capital
    markets, and in many of those capital markets IFRS are accepted.
    More than 1,100 Chinese companies have recently switched over
    to new accounting standards bringing their books in line with
    international norms
          Classification of IFRSs
   Financial Statements
   Assets
   Liabilities
   Revenue
   Expenditure
   Recognition & Measurement
   Disclosure & Presentation
   Industry Specific IFRSs
   Others

       Financial Statements

 IAS 1 Presentation of Financial Statements
 IAS 7 Cash flow statements

Business Combinations & Group

  IAS 27 Consolidated financial statements and
   accounting for investments in subsidiaries
  IFRS 3 Business Combinations

  IAS 28 Investments in associate

  IAS 31 Financial reporting of interest in joint

      Financial Instruments

 IAS 32 Financial instruments – presentation
 IAS 39 Financial instruments – recognition and
 IFRS 7 Financial instruments - disclosures

 IAS 38 Intangible assets
 IAS 16 Property, plant and equipment
 IAS 40 Investment property
 IAS 23 Borrowing costs
 IFRS 5 Non – current assets held for sale and
  discontinued operations
 IAS 2 Inventories

   IAS 41 Agriculture
   IAS 20 Accounting for grants and disclosure of
    government assistance
   IAS 17 Leases
 IAS 12 Income taxes
 IAS 37 Provisions,Contingent Liabilities and
  Contingent Assets

     Recognition & Measurement
   IAS 21 The Effect of Changes in Foreign
    Exchange Rates
   IAS 36 Imapirement of Assets
       IAS 10 Events after the balance sheet date

       Disclosure & Presentation
   IFRS 8 Operating Segments
   IAS 33 Earnings Per Share
   IAS 24 Related Party Disclosures

   IAS 9 Revenue
   IAS 11 Construction Contracts

   IAS 19 Employee Benefits
   IAS 2 Share Based Payments

   IFRS 1 First –time Adoption of International
    Financial Reporting Standards
   IAS 29 Financial Reporting In Hyperinflationery
   IAS 34 Interim Financial Reporting

         Industry Specific IFRSs
   IFRS 4 Insurance Contracts
   IFRS 6 Exploration for and Evaluation of
    Mineral Resources
   IFRIC 12 & SIC 29 Service Concession

 Framework of Financial Statements
 Fundamental  Assumptions
 Qualitative Characteristics of Financial
 Components of Complete set of Financial
 Elements of Financial Statements

              Presentation of FS
 Statement    of Financial Position
   Current  / Non-Current
   Liquidity

 Statement    of Comprehensive Income
   Function of Expense
   Nature of Expense

 Retrospectiveapplication for Change in
  Accounting Policy and Prior Period Errors
 Proposed Dividends
    Recognition and Measurement of Assets
   Types of Assets other than for specialised industries
      IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41, IFRS
   Initial Measurement
     IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41, IFRS 5
   Subsequent Measurement
      IAS 2, IAS 16, IAS 17, IAS 39, IAS 38, IAS 40, IAS 41, IFRS
       5, IAS 36, IAS 23, IAS 20
   Effect of Change in Method of Depreciation / Amortisation
   Derecognition

Recognition & Measurement of Liabilities
 Income  Taxes IAS 12
 Employee Benefits IAS 19

 Provisions IAS 37

 Share Based Payment IFRS 2

    Revenue Recognition Principles
 Measurement   at Fair Value of the Consideration
 Cost should be clear

 No continuing managerial involvement

 Interest on the basis of effective interest method

Recognition & Measurement of Financial
 Definitions
   Financial Instrument
   Financial Asset

   Financial Liability

 Categories of Financial Asset
 Categories of Financial Liabilities

 Compound Financial Instruments

 Hedge Accounting

SUBJECT                IFRS                             US GAAP                         Indian GAAP

Accounting framework

Historical cost        Generally uses historical        No revaluations except for      Uses historical cost, but
                       cost, but intangible assets,     certain types of financial      property, plant and
                       property plant and               instruments.                    equipment may be revalued
                       equipment (PPE) and                                              to fair value. Certain
                       investment property may be                                       derivatives are carried at fair
                       revalued to fair value.                                          value.
                       Derivatives, biological assets                                   No comprehensive guidance
                       and certain securities are                                       on derivatives and biological
                       revalued to fair value.                                          assets.

Components of          Two years’ consolidated          Similar to IFRS, except three   Single-entity parent company
financial              balance sheets, income           years required for SEC          (standalone) two years’
statements             statements, cash flow            registrants (public             balance sheets, income
                       statements, changes in           companies) for all              statements, cash flow
                       equity and accounting            statements except balance       statements, and accounting
                       policies and notes.              sheet.                          policies and notes.
                       In limited circumstances or      Specific accommodations in      Public listed company:
                       on a voluntary basis, an         certain circumstances for       Additionally are required to
                       entity may present single-       foreign private issuers that    prepare consolidated
                       entity parent company            may offer relief from the       financial statements along
                       (standalone) financial           three-year requirement.         with the standalone financial
                       statements along with its                                        statements.
                       consolidated financial

Balance sheet      Does not prescribe a                Entities may present either a    Accounting standards do not
                   particular format. A liquidity      classified or non-classified     prescribe a particular format;
                   presentation of assets and          balance sheet. Items on the      certain items must be
                   liabilities is used, instead of a   face of the balance sheet are    presented on the face of the
                   current/non-current                 generally presented in           balance sheet.
                   presentation, only when a           decreasing order of liquidity.   Formats are prescribed by
                   liquidity presentation              US public companies should       the Companies Act and other
                   provides more relevant and          follow SEC regulations.          industry regulations like
                   reliable information. Certain                                        banking, insurance, etc.
                   minimum items are
                   presented on the face of the
                   balance sheet.
Income statement   Does not prescribe a                Present as either a single-      Does not prescribe a
                   standard format, although           step or multiple-step format.    standard format; but certain
                   expenditure is presented in         Expenditures are presented       income and expenditure
                   one of two formats (function        by function.                     items are disclosed in
                   or nature). Certain minimum         US public companies should       accordance with accounting
                   items are presented on the          follow SEC regulations.          standards and the
                   face of the income                                                   Companies Act.
                   statement.                                                           Industry-specific formats are
                                                                                        prescribed by industry
Statement of       Statement shows capital            Similar to IFRS except that       No separate statement is
changes in share   transactions with owners, the      the statement is presented        required.
(stock) holders’   movement in accumulated            as a primary statement; SEC       Changes in shareholders’
equity             profit and a reconciliation of     rules allow certain               equity are disclosed in
                   all other components of            information to be included in     separate schedules of ‘Share
                   equity. The statement is           the notes and not in the          capital’ and ‘Reserves and
                   presented as a primary             primary statement.                surplus’.
                   statement except when a
                   SoRIE is presented. In this
                   case, only disclosure in the
                   notes applies.
Correction of   Comparatives are restated        Similar to IFRS.                Restatement is not required.
errors          and, if the error occurred                                       The effect of correction is
                before the earliest prior                                        included in current-year
                period presented, the                                            income statement with
                opening balances of assets,                                      separate disclosure.
                liabilities and equity for the
                earliest prior period
                presented are restated.

Consolidation   Based on voting control or       A bipolar consolidation         Based on voting control or
model           power to govern. Control is      model is used, which            control over the composition
                presumed to exist when           distinguishes between a         of the board of directors or
                parent owns, directly or         variable interest model and a   the governing body.
                indirectly through               voting interest model.          Control exists when (a)
                subsidiaries, more than one      Control can be direct or        parent owns, directly or
                half of an entity's voting       indirect and may exist with a   indirectly through
                power. Control also exists       lesser percentage of            subsidiaries, more than one
                when the parent owns half or     ownership (voting interest      half of an entity's voting
                less of the voting power but     model). ’Effective control’,    power or (b) it controls
                has legal or contractual         which is a similar notion to    composition of an entity’s
                rights to control, or de facto   de facto control under IFRS,    board of directors so as to
                control (rare circumstances).    is very rare if ever employed   obtain economic benefits
                The existence of currently       in practice.                    from its activities.
                exercisable potential voting                                     The existence of currently
                rights is also taken into                                        exercisable potential voting
                consideration.                                                   rights is not taken into
                Special purpose entities                                         consideration.
                (SPEs) controlled by an
                entity are also consolidated.

Types   All business combinations        Similar to IFRS.   No comprehensive
        are acquisitions.                                   accounting standard on
                                                            business combinations.
                                                            All business combinations
                                                            are acquisition; except
                                                            uniting of interests method is
                                                            used in certain
                                                            amalgamations when all the
                                                            specified conditions are met.
                                                            Accounting would defer for
                                                             An entity acquired and
                                                            held as a subsidiary
                                                             An acquisition by way of
                                                            amalgamation of entity
                                                             A business acquisition
                                                            (assets & liabilities only)

   Generally Accepted Accounting Principles (accounting
    rules) used in the United States to prepare financial
    statements for publicly traded companies and many
    privately-held companies.
   GAAP is not written in law, although the U.S.
    Securities and Exchange Commission (SEC) requires
    that it be followed in financial reporting by publicly-
    traded companies.
   The Financial Accounting Standards Board (FASB) sets
    the accounting principles for the profession.
   US GAAP provisions differ somewhat from
    International Financial Reporting Standards

1.   Statements of Financial Accounting Standards - the most
     authoritative GAAP setting publications.
2.   Statements of Financial Accounting Concepts - first issued in
     1978. They are part of the FASB's conceptual framework
     project and set forth fundamental objectives and concepts that
     the FASB use in developing future standards. However, they are
     not a part of GAAP.
3.   7 Financial Accounting concepts issued till date

       Financial Accounting Standards

   And 36 were issued as amendments
   And in the balance 41 no changes were made

    Accounting Standards in India
   Accounting Standards issued by ICAI- [ AS 1 to 32]
   Companies (Accounting Standards) Rules, 2006 notifying
    accounting standards 1-7 and 9-29, effective for
    COMPANIES for accounting periods commencing on or after
    7 December 2006
   Accounting standards to be followed by any class of assessees
    or in respect of any class of income – Sec 145(2) of Income
    Tax Act,1961
   Government Accounting standards issued by Government
    Accounting Standards Advisory Board
   Accounting standards for Local bodies issued by ICAI

   Accounting Standards Board (ASB) of ICAI formed on
    21st April, 1977.
   As on date 32 Accounting standards have been issued.
   Recognising the need for convergence with IFRS in the
    country, ICAI has decided to fully converge with IFRS
    issued by the IASB on or after April 1, 2011 for the
    listed entities and other public interest entities such as
    banks, insurance companies.

                 Useful Websites

   International Accounting Standard Board-
   Website launched by Deloitte-
   Institute of Chartered Accountants of India-
   International Federation of Accountants-
   Financial Accounting Standards Board-

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