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AMITY INTERNATIONAL BUSINESS SCHOOL

ACCOUNTS FOR MANAGERS ASSIGNMENT

By ACHIN AGARWAL MBA - International Business Semester Enrolment No. Roll No. Section : : : : First A1802012043 1612F39 F

International Financial Reporting Standards ( I. F. R. S. )

IFRS refers to International Financial Reporting System which are applied while preparing the balance sheet and other profitability statements of a company and are developed by the IABS. These have already been applied in more than a 100 countries and would soon be used across the globe. These have already been applied in more than a 100 Countries and would soon be used across the Globe. It is expected that I.F.R.S. adoption worldwide will be beneficial to investors and other users of financial statements, by Reducing the Costs of Comparing alternative Investments and Increasing the Quality of Information. The Companies are also expected to benefit, as investors will be more willing to provide financing. There is s need for IFRS for different countries to emply different accounting standards while computing the profits of a company. It may happen that if the profits are computed as per US Accounting laws the profits are $100 billion but when the same profits are computed as per the Indian Accounting Laws, it may turn out to be $200 Billion. The importance of having one standard was felt by the regulators, investors, large entities and audit firms as the business becomes more global. International Financial Reporting Standards ( I.F.R.S.) was issued by International Accounting Standards Board ( I.A.S.B. ). The International Standard setting process began long ago as an effort to Standardize and make easier to adopt by the developing and smaller nations which feel difficult to set and establish their own standards on Accounting and Reporting. These have already been applied in more than a 100 Countries and would soon be used across the Globe. It is expected that I.F.R.S. adoption worldwide will be beneficial to investors and other users of financial statements, by Reducing the Costs of Comparing alternative Investments and Increasing the Quality of Information. The Companies are also expected to benefit, as investors will be more willing to provide financing.

It also provides various benefits to the country which can be summarized as follows : Benefits to the Economy : As the market expands globally, the need for a global standard is also increasing. Implementation of I.F.R.S. benefits the economy by increasing the growth of its International Business. It facilitates the maintenance of orderly and efficient capital markets and also helps to increase the capital formation and thereby economic growth. Benefits to the Investors : Investors who are willing to invest abroad want information which is more relevant, reliable, timely and comparable across various jurisdictions. Financial statements prepared using a common set of accounting standards help investors better understand the investment opportunities as opposed to financial statements prepared using a different set of national accounting standards. For better understanding of financial statements, global investors have to incur more costs in terms of the time and efforts to convert the financial statements so that they can confidently compare opportunities. Investors confidence would be strong if the accounting standards used are globally accepted. Convergence with I.F.R.S. contributes to investors understanding and confidence in high quality financial statements.

Challenges that would be faced by the corporate in India to implement I.F.R.S. Major Challenges : Shortage of Resources With the convergence to I.F.R.S.,strengthening of corporate governance norms, increasing financial regulations and global economic growth, accountants are most sought after. India with a population of more than 110 Crores has only approx. 1,60,000 Chartered Accountants - far below its requirements which is a very crucial issue for the economy like ours. Training I.F.R.S. has to be uniformly understood and consistently applied. Training to be given to all stakeholders, CFOs, Auditors, Audit Committee, Analysts, Regulators, Tax authorities etc. so that there is a proper development and people should be able to understand that what are they acocuntable to. Information Systems Financial accounting and reporting systems must be able to produce robust and consistent data for reporting. The system must be capable of capturing new information for required disclosures, such as fair values of financial instruments, related party transactions, segment information etc. Extra security for addressing potential risk of business interruptions particularly Fraud, Cyber terrorism and data corruption etc. Taxes I.F.R.S. convergence will have significant impact on tax liability calculations. Tax authorities should ensure full clarity on the tax treatment for e.g, unrealised gains or losses on various accountings required for financial instruments etc. Tax planning strategies has to be revisited.

Communication I.F.R.S. may significantly change reported earnings and various performance indicators. Managing market expectations and educating analysts for a particular business will be critical. Distributable profits I.F.R.S. is value driven, which results very often in unrealized gains and losses. Whether this can be considered for the purpose of computing distributable profits will have to be debated.