International Financial Accounting Standards ( IFRS )

On 22 January 2010, the Ministry of Corporate Affairs (MCA) issued a press release setting out
the roadmap for International Financial Reporting Standards (IFRS) convergence in India. The
roadmap requires IFRS to be made applicable in a phased manner. This is an historic step that
will elevate Indian entities and their finance and accounting professionals to much greater
heights. The publication of the roadmap was eagerly awaited by those who have been saying
that the convergence to IFRS in India is a matter of when and how” and not “if.”

Challenges faced by companies in IFRS implementation

- IFRS is itself a moving target with changes being done continually

- There are not many trained resources for IFRS

- Also IFRS training in an organization will be huge task

- Not many people are aware and have understanding of IFRS

It is better for the corporate to start as early as possible the implementation of IFRS and come
up with IFRS roadmap because Government is not looking forward to extend the date of 2011.
Ultimately the onus will be on management to comply with the requirement and the auditors
will only have to comment on whether the management has properly compiled with or not.

Some of the differences between IFRS & Indian GAAP are as follows :

Subject IFRS Indian GAAP

Depreciation Allocated on a systematic Depreciation is provided based on

basis to each accounting
period over the useful life
of the asset.
the useful lives of assets or the
minimum rates prescribed by the
Indian Companies Act, whichever is
higher. Asset lives are not prescribed
by the Companies Act, but can be
derived from the depreciation rates.

Leasehold Land Disclosed as prepaid Disclosed as a part of fixed assets.

assets and accounting
treatment is similar to
operating leases.
Changes in Restate comparatives and Include effect in the income
accounting prior-year opening statement of the period in which the
policies retained earnings. change is made except as specified in
certain standards where the change
resulting from adoption of the
standard has to be adjusted against
opening retained earnings.

Fringe benefits Included as part of related Disclosed as a separate item after

tax expense (fringe benefit) profit before tax on the face of the
which gives rise to income statement.
incurrence of the tax.

Convertible debt Account for convertible Convertible debt is recognised as a

debt on split basis, liability based on legal form without
allocating proceeds any split.
between equity and debt

Functional Currency of primary Does not define functional currency.

currency economic environment in
which entity operates.