Comparative Fundamental Analysis of Indian Banks

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					              Introduction to IFRS
IFRS stands for International Financial Reporting Standards.

IFRS is A Set of International Accounting Standards stating how particular
types of transaction and other events should be reported in financial

IFRS:-A set of Financial Reporting Standards issued by the International
Accounting Standards Board (IASB) is recognized under the brand name
IRRSs. IFRSs’ is a trade mark of the International Accounting Standards
Committee Foundation. IFRSs comprise of:

International Financial Reporting Standards
International Accounting Standards and
Interpretations originated by the International Financial Reporting
Interpretations Committee( IFRIC) and
Interpretations issued by the former Standing Interpretations Committee (
                 Introduction to IFRS
Presently there are 8 International Financial Reporting Standards, 29
International Accounting Standards , 15 IFRIC interpretations and 11 SIC

The IASB is an independent standard setting body of the International
Accounting Standards Committee Foundation (IASC Foundation).

Structure of IASC Foundation and IASB
The International Accounting Standards Committee (IASC) was renamed as
International Accounting Standards Board ( IASB). The principal
responsibilities of the IASB are to:
Develop and issue International Financial Reporting Standards and
Exposure Drafts, and
Approve Interpretations developed by the International Financial Reporting
Interpretations Committee (IFRIC).
         Introduction to IFRS
Objective OF IFRS

To standardize accounting methods and procedures.
To lay down principles for preparation and presentation.
To establish benchmark for evaluating the quality of financial
statements prepared by the enterprise.
To ensure the users of financial statements get creditable financial
To attain international levels in the related areas
             Introduction to IFRS
Accounting Standards and the Companies Act, 1956
As per Section 211 sub sections (3 A), (3 B) and (3 C) inserted by the Companies
Amendment Act, 1999 w.e.f. 31.10.1998:
(3A) every P & L Account and Balance Sheet shall comply with accounting
(3 B) deviations, if any, to be disclosed with reasons and financial effect of deviation,
(3 C) "accounting standards" means standards of accounting recommended by ICAI
or as may be prescribed by Central Govt. in consultation with National Advisory
Committee on Accounting Standards.

Section 217 sub section (2AA) inserted by the Companies
Amendment Act, 2000 w.e.f. 13.12.2000:

(2AA) The Board's report shall also include a Directors' Responsibility Statement indicating
therein (1) that in preparation of annual accounts, the applicable accounting standards had been
followed along with proper explanation relating to material departure.

Section 227 sub section (3)(d) inserted by the Finance Act,
1999 w.e.f. 31.10.1998:
(3)(d) the auditor's report shall also state whether, in his opinion, the P & L Account and the Balance Sheet comply with
accounting standards referred in section 211 (3C),
(4) where answer to (3)(d) is negative or with qualification, it shall also state the reasons thereof.
           Introduction to IFRS

India is one of the over 100 countries that have or are moving towards IFRS (
International Financial Reporting Standards) convergence with a view to bringing
about a uniformity in reporting systems globally, enabling businesses, finances
and funds to access more opportunities.

Indian companies are listed on overseas stock exchanges and have to recast
their accounts to be compliant with GAAP requirements of those countries.
Foreign companies having subsidiaries in India are having to recast their
accounts to meet Indian & overseas reporting requirements which are different.

Foreign Direct Investors (FDI), overseas financial institutional investors (FII) are
more comfortable with compatible accounting standards and companies
accessing overseas funds feel the need for recast of accounts in keeping with
globally accepted standards.

ICAI has decided to implement IFRS in India. The Ministry of Corporate Affairs
has also announced its commitment to convergence to IFRS by 2011.
           Introduction to IFRS

Compliance with IFRS in India is restricted to ‘Public Entities’ which include
those companies & entities listed on any stock exchange or have raised
money from the public, or have a substantial public interest, or public sector
companies. IFRS in India would cover the following public interest entities in
the first phase.

Listed companies
Banks, insurance companies, mutual funds, and financial institutions
Turnover in preceding year > INR 1 billion
Borrowing in preceding year > INR 250 million
Holding or subsidiary of the above

IFRS is not applicable to SME’s as of now
            Introduction to IFRS

IFRS for public entities in India is applicable from 01/04/2011. The opening IFRS
balance sheet at the date of transition to IFRS – 01/04/2010, which is the start date for
full comparative information presentation in IFRS


IFRS implementation affects several areas of the business entity, such as
presentation of accounts, the accounting policies and procedures, the way legal
documents are drafted, the way the entity looks at its assets and their usage, as well
as the its communications with its stakeholders and also the way it conducts its

This fundamental and pervasive nature of impact of IFRS, makes it imperative that
sufficient planning and thought is given to this aspect and choices made at the
transition stage itself, as they determine the effect on the company and its operations.

A detailed analysis of all aspects of impact and change as well as all legal
documentation and communication becomes necessary.
         Introduction to IFRS
           LIST OF IFRS
IFRS-1   First time Adoption of International Financial Reporting Standards

IFRS-2   Share-based payments

IFRS-3   Business Combinations

IFRS-4   Insurance Contracts

IFRS-5   Non Current Assets held for sale and Discontinued Operations

IFRS-6   Exploration for and evaluation of Mineral Resources.

IFRS-7   Financial Instruments-Disclosures

IFRS-8   Operating Segments
                  Introduction to IFRS
                 LIST OF IASs
1.    IAS 1    Presentation of Financial Statements
2     IAS 2    Inventories
3.    IAS 7    Statement of Cash Flows
4.    IAS 8    Accounting Policies, Changes in Accounting Estimates and Errors
5.    IAS 10   Events after the Reporting Period
6.    IAS11    Construction Contracts
7.    IAS12    Income Taxes
8.    IAS16    Property, Plant and Equipment
9.    IAS17    Leases
10.   IAS18    Revenue
11.   IAS19    Employee Benefits
12.   IAS20    Accounting for Government Grants and Disclosure of Government
13.   IAS21    The Effects of Changes in Foreign Exchange Rates
14.   IAS23    Borrowing Costs
15.   IAS 24   Related Party Disclosures
                 Introduction to IFRS
                    LIST OF IASs
16.   IAS   26    Accounting and Reporting by Retirement Benefit Plans.
17.   IAS   27    Consolidated and Separate Financial Statements
18.   IAS   28    Investments in Associates
19.   IAS   29    Financial Reporting in Hyperinflationary Economies
20.   IAS   31    Interests in Joint Ventures
21    IAS   32    Financial Instruments : Presentation
22.   IAS   33    Earnings per Share
23.   IAS   34    Interim Financial Reporting
24.   IAS   36    Impairment of Assets
25.   IAS   37    Provisions, Contingent Liabilities and Contingent Assets
26.   IAS   38    Intangible Assets
27.   IAS   39    Financial Instruments : Recognition and Measurement
28.   IAS   40    Investment Property
29.   IAS   41    Agriculture
                Introduction to IFRS
List of IFRIC Interpretations as on 30.11.2009

1.   IFRIC 1            Changes in Existing Decommissioning, Restoration and Similar Liabilities
2.   IFRIC 2            Members' Shares in Co-operative Entities and Similar Instruments
3.   IFRIC 4            Determining Whether an Arrangement Contains a Lease
4.   IFRIC 5            Rights to Interests Arising from Decommissioning, Restoration and Environmental
                        Rehabilitation Funds.
5. IFRIC 6              Liabilities Arising from Participating in a Specific Market - Waste Electrical and
                        Electronic Equipment
6. IFRIC 7              Applying the Restatement Approach under IAS 29 Financial Reporting in
                        Hyperinflationary Economies
7. IFRIC 8               Scope of IFRS 2 *
8 IFRCI 9               Reassessment of Embedded Derivatives
9. IFRIC 10             Interim Financial Reporting and Impairment
10 IFRIC11*             IFRS 2: Group and Treasury Share Transactions
11. IFRIC 12            Service Concession Arrangements
12. IFRIC13              Customer Loyalty Programme
13. IFRIC 14             IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements an
                        their Interaction
14. IFRIC 15            Agreement for the Construction of Real Estate
15 IFRIC 16             Hedges of Net investments in a Foreign Operation
16 IFRIC 17             Distribution of Non Cash Assets to Owners
17. IFRIC 18            Transfer of Assets from Customers

* Interpretations contained in IFRIC 8 and IFRIC 11 are now included in IFRS 2 ( as amended in June 2009).
         Introduction to IFRS
List of SIC Interpretations as on 30.11.2009

1.    SIC 7    Introduction of the Euro
2.    SIC 10   Government Assistance – No Specific Relation to Operating Activities
3.    SIC 12   Consolidation – Special Purpose Entities
4.    SIC 13   Jointly Controlled Entities – Non-Monetary Contributions by Ventures
5.    SIC15    Operating Leases – Incentives
6.    SIC 21   Income Taxes – Recovery of Revalued Non-Depreciable Assets
7.    SIC 25   Income Taxes – Changes in the Tax Status of an Enterprise or its
8.    SIC 27   Evaluating the Substance of Transactions in the Legal Form of a Lease
9.    SIC 29   Disclosure – Service Concession Arrangements
10.   SIC 31   Revenue – Barter Transactions Involving Advertising Services
11.   SIC 32   Intangible Assets – Website Costs
        Introduction to IFRS
Requirements of IFRS

IFRS financial statements consist of (IAS1.8)

A Statement of Financial Position

A Comparative Income Statement

 Either a statement of changes in equity (SOCE) or a statement of recognized
income or expense ("SORIE")

A Cash Flow Statement or Statement of Cash Flows

Notes, including a summary of the significant accounting policies

Comparative information is provided for the previous reporting period (IAS 1.36).
An entity preparing IFRS accounts for the first time must apply IFRS in full for
the current and comparative period although there are transitional exemptions
              Introduction to IFRS

On 6 September 2007, the IASB issued a revised IAS 1 Presentation of
Financial Statements. The main changes from the previous version are to
require that an entity must:
present all non-owner changes in equity (that is, 'comprehensive income' )
either in one statement of comprehensive income or in two statements (a
separate income statement and a statement of comprehensive income).
Components of comprehensive income may not be presented in the
statement of changes in equity.
present a statement of financial position (balance sheet) as at the beginning
of the earliest comparative period in a complete set of financial statements
when the entity applies an accounting
'balance sheet' will become 'statement of financial position'
'income statement' will become 'statement of comprehensive income'
'cash flow statement' will become 'statement of cash flows'.
The revised IAS 1 is effective for annual periods beginning on or after 1
January 2009. Early adoption is permitted.
        Introduction to IFRS
First Time Adoption of IFRS
IFRS 1 requires an entity to comply with each IFRS effective at the
reporting date for its first IFRS financial statements. In particular, the
IFRS     requires an entity to do the following in the opening
IFRS balance sheet that it prepares as a starting point for its
accounting under IFRSs:

Recognize all assets and liabilities whose recognition is required by
Do not recognize items as assets or liabilities if IFRSs do not permit
such recognition;
Reclassify items that it recognized under previous GAAP as one type of
asset, liability or component of equity, which are different type of asset,
liability or component of equity under IFRSs; and
Apply IFRSs in measuring all recognized assets and liabilities.
    Introduction to IFRS


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