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Personal Details Name: Purvesh Jobanputra MFM : Sem 5, Div: B Roll No : 220 Proje t :!

n "FRS Submitte# to : Pro$essor %emant Junar&ar

'%() "S "FRS*

International Financial Reporting Standards (IFRS), together with International Accounting Standards (IAS), are a "principles-based" set of standards that establish broad rules rather than dictating specific accounting treatments. From !"# to $%% , IAS were issued b& the International Accounting Standards 'ommittee (IAS'). In April $%% the International Accounting Standards (oard (IAS() adopted all IAS and began de)eloping new standards called IFRS.

Stru ture o$ "FRS

IFRS are considered a "principles based" set of standards in that the& establish broad rules as well as dictating specific treatments. International Financial Reporting Standards comprise* International Financial Reporting Standards (IFRS) - standards issued after $%% International Accounting Standards (IAS) - standards issued before $%% Interpretations originated from the International Financial Reporting Interpretations 'ommittee (IFRI') - issued after $%% Standing Interpretations 'ommittee (SI') - issued before $%%

+here is also a Framewor, for the -reparation and -resentation of Financial Statements which describes of the principles underl&ing IFRS.

+he Framewor, for the -reparation and -resentation of Financial Statements states basic principles for IFRS.

!bje tive o$ $inan ial statements +he framewor, states that the ob.ecti)e of financial statements is to pro)ide information about the financial position, performance and changes in the financial position of an entit& that is useful to a wide range of users in ma,ing economic decisions,and to pro)ide the current financial status of the entit& to its shareholders and public in general.

,n#erl-in. assumptions +he underl&ing assumptions used in IFRS are* ( rual basis - the effect of transactions and other e)ents are recognised

when the& occur, not as cash is recei)ed or paid /oin. on ern - the financial statements are prepared on the basis that an entit& will continue in operation for the foreseeable future

0ualitative hara teristi s o$ $inan ial statements +he Framewor, describes the /ualitati)e characteristics of financial statements as being 0nderstandabilit& Rele)ance Reliabilit& and 'omparabilit&.

1lements o$ Finan ial Statements +he Framewor, sets out the statement of financial position (balance sheet) as comprising* (ssets - resources controlled b& the entit& as a result of past e)ents and from which future economic benefits are e1pected to flow to the entit& 2iabilities - a present obligation of the entit& arising from past e)ents, the settlement of which is e1pected to result in an outflow from the entit& of resources embod&ing economic benefits 13uit- - the residual interest in the assets of the entit& after deducting all its liabilities and the statement of comprehensi)e income (income statement) as comprising* Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities.

21penses are decreases in such economic benefits.

4ontent o$ $inan ial statements:5 IFRS financial statements consist of (IAS .3) a balance sheet income statement either a statement of changes in e/uit&(S4'2) or a statement of recognised income or e1pense ("S4RI2") a cash flow statement notes, including a summar& of the significant accounting policies

'omparati)e information is pro)ided for the pre)ious reporting period (IAS .#5). An entit& preparing IFRS accounts for the first time must appl& IFRS in full for the current and comparati)e period although there are transitional e1emptions (IFRS ."). 4n 5 September $%%", the IAS( issued a re)ised IAS entit& must* present all non-owner changes in e/uit& (that is, 6comprehensi)e income6 ) either in one statement of comprehensi)e income or in two statements (a separate income statement and a statement of comprehensi)e income). 'omponents of comprehensi)e income ma& not be presented in the statement of changes in e/uit&. present a statement of financial position (balance sheet) as at the beginning of the earliest comparati)e period in a complete set of financial statements when the entit& applies an accounting polic& retrospecti)el& or ma,es a retrospecti)e restatement. disclose income ta1 relating to each component of other comprehensi)e income. -resentation of Financial

Statements. +he main changes from the pre)ious )ersion are to re/uire that an

disclose reclassification ad.ustments relating to components of other comprehensi)e income.


changes the titles of financial statements as the& will be used in IFRSs* 6balance sheet6 will become 6statement of financial position6 6income statement6 will become 6statement of comprehensi)e income6 6cash flow statement6 will become 6statement of cash flows6. is effecti)e for annual periods beginning on or after 7anuar&

+he re)ised IAS

$%%!. 2arl& adoption is permitted.

Ne essit- o$ "FRS:5
(& adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors,ma,ing comparisons easier.Furthermore,companies with subsidiaries in countries that re/uire or permit IFRS ma& be able to use one accounting langauge compan& 8 wide.'ompanies also ma& need to con)ert to IFRS if the& are a subsidiar& of a foreign compan& that must use IFRS,or if the& ha)e a foreign in)estor that must use IFRS.'ompanies ma& also benefit b& using IFRS if the& wish to raise capital abroad.

%o+ +i#esprea# is the a#option o$ "FRS aroun# the +orl#*

9ore than $%%% companies in appro1imatel& # nations ha)e adopted IFRS,including listed companies in the 2uropean 0nion. 4ther countries, including 'anada and India, are e1pected to transition to IFRS b& $% . 9e1ico plans to adopt IFRS for all listed companies starting in $% $. Some estimate that the number of countries re/uiring or accepting IFRS could grow to :% in the ne1t few &ears. 7apan has introduced a roadmap for adoption that it will decide on in $% $ (with adoption planned for $% 5). Still other countries ha)e plans to con)erge (eliminate significant differences) their national standards with IFRS

"FRS 6 "ND"(:5

+he issue of con)ergence with IFRS has gained significant momentum in India. At present, the AS( of the I'AI formulates Accounting Standards based on IFRS, howe)er, these standards remain sensiti)e to local conditions, including the legal ; economic en)ironment. Accordingl&, the Accounting Standards issued b& the I'AI depart from the corresponding IFRS in order to ensure consistenc& with the legal, regulator& and economic en)ironments of India.

At a meeting held in 9a& $%%5, the council of I'AI e1pressed the )iew that IFRS ma& be adopted in full at a future date, at least for listed and large entries.+he AS(, at a meeting held in August $%%5,considered the matter and supported the council<s )iew that there would be se)eral ad)antages of con)erging with IFRS.=eeping in mind the e1tent of differences between IFRS and Indian Accounting Standards, as well as the fact, that con)ergence with IFRS would be important polic& decision, the AS( decided to form an IFRS +as, Force .+he ob.ecti)es of the +as, Force were to e1plore* +he approach for achie)ing con)ergence with IFRS , and >a&ing down a road map for achie)ing con)ergence with IFRS with a )iew to ma,e India IFRS 8 compliant.

(ased on the recommendation of the IFRS +as, Force, the council of I'AI, at its $5!th meeting decided to con)erge with IFRS, for accounting periods commencing on or after April $% .IFRS will be adopted for listed and other public interest entities such as ban,s , insurance, companies and large 8 si?ed organi?ations. @ith an ob.ecti)e to ensure smooth transition to IFRS from April $% ,I'AI is ta,ing up the matter of con)ergence with IFRS with AA'AS and other regulators including R(I, IRBA and S2(I.+he AA'AS has been established b& the 9inistr& of 'orporate Affairs, Co)ernment of India.I'AI is ta,ing )arious other steps as well as to ensure that IFRS is effecti)el& adopted from April $% . +hese include* Formulations of wor, 8 plan, and 'onducting training programmes for members of I'AI and others concerned to prepare them to implement IFRS. I'AI will also discuss, with the IAS( those areas, where changes in certain IFRS ma& be re/uired, to reflect conditions specific to India and areas of conceptual differences.

In 9a& $%%3, the 9'A issued a press release in which it committed to IFRS con)ergence b& April $% . Recogni?ing the con)ergence efforts of I'AI ; 9'A, the 2uropean 0nion has recentl& allowed entries to use Indian CAA- for listing on a 2uropean securities mar,et without reconciliation through to $% , and if the con)ergence plan is achie)ed, to continue to do so after $% .

B1N1F")S !F (D!P)"N/ "FRS F!R "ND"(N 4!MP(N"1S:5

+he decision to con)erage with IFRS is a milestone decision and is li,el& to pro)ide significant benefits to Indian corporates.Some of them are listed below*

"mprove# a

ess to international apital mar&ets :

9an& Indian entries are e1panding or ma,ing significant ac/uisitions in the global arena, for which large amounts of capital is re/uired.+he ma.orit& of stoc, e1changes re/uire financial information prepared under IFRS.9igration to IFRS will enable Indian entities to ha)e international capital mar,ets, remo)ing the ris, premium that is added to those reporting under Indian CAA-. 2o+er 4ost o$ 4apital : 9igration to IFRS will lower the cost of raising funds, as it will eliminate the need for preparing a dual set of financial statements.It will also reduce accountants< fees, abolish ris, premiums and will enable access to all ma.or capital mar,ets as IFRS is globall& acceptable. 1nable ben hmar&in. +ith .lobal peers an# improve bran# value: Adoption of IFRS will enable companies to gain a broader and deeper understanding of the entit&<s relati)e standing b& loo,ing be&ond countr& and regional milestones. Further, adoption of IFRS will facilitate companies to set targets and milestones based on global business en)ironment, rather than merel& local ones. 1s ape multiple reportin. : 'on)ergence to IFRS, b& all groups entities, will enable compan& managements to )iew all components of the groups on one financial reporting platform. +his will eliminate the need for multiple reports and significant ad.ustment for preparing consolidated financial statements in different stoc, e1changes. Re$le ts true value o$ a 3uisitions : In Indian CAA-, business combinations, with few e1ceptions, are recorded at carr&ing )alues rather than fair )alues of net assets ac/uired. -urchase consideration paid for intangible assets not recorded in the ac/uirer<s boo,s is usuall& not recorded in the financial statements, instead the amount gets added to goodwill.Dence,the true )alue of the business combination is not reflected in the financial statements.IFRS will o)ercome this flaw, as it mandates accounting for net assets ta,en o)er in a business combination at fair )alue.It also re/uires recognition of

intangible assets, e)en if the& ha)e not been recorded in the ac/uiree<s financial statements.

Ne+ opportunities : (enefits from the adoption of IFRS will not be restricted to Indian corporates.In factE it will open up a host of opportunities in the ser)ice sector.@ith a wide pool of accounting professionals, India can emerge as an accounting ser)ices hub for the global communit&.As IFRS is fair )alue focused it will pro)ide significant opportunities to professionals including, accountants, )aluers and actuaries, which in 8 turn, will boost the growth prospects for the (-4F=-4 segment in India.

"FRS 4%(221N/1S:5
Some o$ the are liste# belo+: Shorta.e o$ resour es : @ith the con)ergence to IFRS, implementation of S4G, strengthening of corporate go)ernance norms, increasing financial regulations and global economic growth, accountants are most sought after globall&. Accounting resources is a ma.or challenge.IndiaE with a population of more than billion has onl& appro1imatel& H:%%% 'hartered Accountants, which is far below its re/uirement. )rainin. : If IFRS has to be uniforml& understood and consistentl& applied, training needs of all sta,eholders, including 'F4s, auditors, audit committees, teachers, students, anal&sts, regulators and ta1 authorities need to be addressed. It is imperati)e that IFRS is introduced as a full sub.ect in uni)ersities and in the 'hartered Accountanc& s&llabus. "n$ormation s-stems: Financial accounting and reporting s&stems must be able to produce robust and consistent data for reporting financial information.+he s&stems must also be capable of capturing new information for re/uired disclosures, such as segment information, fair )alues of financial instruments and related part& transactions.As financial accounting and reporting s&stems are modified and strengthened to deli)er information in accordance with IFRS, entries need to enhance their I+ securit& in order to minimi?e the ris, of business interruption ,in particular to address the ris, of fraud, c&ber terrorism and data corruption. )a7es:

IFRS con)ergence will ha)e significant impact on financial statements and conse/uentl& ta1 liabilities.+a1 authorities should ensure that there is clarit& on the ta1 treatment of items arising from con)ergence to IFRS.For e1ample, will go)ernment authorities ta1 unreali?ed gains arising out of the accounting re/uired b& the standards on financial instrumentsI From an entit& point of )iew, a thorough re)iew of e1isting ta1 planning strategies is essential to test their alignment with changes created b& IFRS.+a1,other regulator& issues and the ris,s in)ol)ed will ha)e to be considered b& the entities. 4ommuni ation: IFRS ma& significantl& change reported earnings and )arious performance indicators. 9anaging mar,et e1pectations and educating anal&sts will therefore be critical.A compan&<s management must understand the differences in the wa& the entit&<s performance will be re)iewed, both internall& and in the mar,et place and agree on ,e& messages to be deli)ered to in)estors and other sta,e holders.Reported profits ma& be different from percei)ed commercial performance due to the increased use of fair )alues, and the restriction on e1isting practices such as hedge accounting. 'onse/uentl&, the indicators for assessing both business and e1ecuti)e performance will need to be re)isited. Mana.ement ompensation an# #ebt ovenants: +he amount of compensation calculated and paid under performance 8 based e1ecuti)e, and emplo&ee compensation plans ma& be materiall& different under IFRS, as the entit&<s financial results ma& be considered different. Significant changes to the plan ma& be re/uired to reward an acti)it& that contributes to an entit&<s success, within the new regime.Re 8 negotiating contracts that referenced reported accounting amounts,such as ,ban, co)enants or F''( con)ersation trigger, ma& be re/uired on con)ergence to IFRS.

Di$$eren e bet+een "FRS an# "n#ian /((P

Some o$ them are liste# belo+ :5

Subje t Distorical cost

"FRS Cenerall& uses historical cost, but intangible assets, propert& plant and e/uipment (--2) and in)estment propert& ma& be re)alued to fair )alue. Beri)ati)es, biological assets and certain securities are re)alued to fair )alue.

"n#ian /((P 0ses historical cost, but propert&, plant and e/uipment ma& be re)alued to fair )alue. 'ertain deri)ati)es are carried at fair )alue. Ao comprehensi)e guidance on deri)ati)es and biological assets.

(alance sheet

Boes not prescribe a particular format. 'ertain minimum items are presented on the face of the balance sheet. A li/uidit& presentation of assets and liabilities is used instead of a currentFnon-current presentation, onl& when a li/uidit& presentation pro)ides more rele)ant and reliable information. Boes not prescribe a standard format, although e1penditure is presented in one of two formats (function or nature). 'ertain minimum items are presented on the face of the income statement.

Accounting standards do not prescribe a particular format but certain items must be presented on the face of the balance sheet. Formats are prescribed b& the 'ompanies Act and other industr& regulations li,e ban,ing, insurance, etc.

Income statement

Boes not prescribe a standard formatE but certain income and e1penditure items are disclosed in accordance with accounting standards and the 'ompanies Act. Industr&-specific formats are prescribed b& industr& regulations. Befined as e)ents or transactions clearl& distinct from the ordinar& acti)ities of the entit& and are not e1pected to recur fre/uentl& and regularl&. Bisclosed separatel&. +he effect and impact of change is included in current-&ear income statement. +he impact of change is disclosed separatel&. Restatement is not re/uired. +he effect of correction is included in current-&ear income statement with separate disclosure.

21traordinar& items


'hanges in accounting polic&

'omparati)es are restated, unless specificall& e1emptedE where the effect of period(s) not presented is ad.usted against opening retained earnings. 'omparati)es are restated and, if the error occurred before the earliest prior period presented, the opening balances of assets, liabilities and e/uit& for the earliest prior period presented are restated.

'orrection of errors

Special purposes entit& (S-2) Befinition of .oint )enture

'onsolidated where the substance Ao specific guidance. of the relationship indicates control. 'ontractual arrangement whereb& two or more parties underta,e an economic acti)it&, which is sub.ect to .oint control. 21clusion if in)estment is held-for-sale. -rohibited. Similar to IFRS. 21clusion if it meets the definition of a subsidiar& or e1emptions similar to non-consolidation of subsidiaries. Re/uired for certain amalgamations when all the specified conditions are met.

0niting of interests method

(usiness combinations in)ol)ing entities under common control Bepreciation

Aot specificall& addressed. 2ntities Ao specific guidance. Aormal elect and consistentl& appl& either business combination accounting purchase or pooling-of-interest would appl&. accounting for all such transactions. Allocated on a s&stematic basis to Similar to IFRS, e1cept where the each accounting period o)er the useful life is shorter as en)isaged useful life of the asset. under the 'ompanies Act or the rele)ant statute, the depreciation is computed b& appl&ing a higher rate. Recognised on an accrual basis using the effecti)e interest method. Recognised on an accrual basisE practice )aries with respect to recognition of discounts and premiums. @ith the adoption of AS : (re)ised), similar to IFRS, howe)er, timing of recognising liabilit& could differ. -rior to AS : (re)ised), no specific guidance. Cenerall&, )oluntar& retirement e1penses are recognised on acceptable of the plan b& emplo&ees and amortised o)er # to : &ears. 'apitalised if recognition criteria are metE all intangibles are amortised o)er useful life with a rebuttable presumption of not e1ceeding % &ears. Re)aluations are not permitted.

Interest e1pense

+ermination benefits +ermination benefits arising from redundancies are accounted for similarl& to restructuring pro)isions. +ermination indemnit& schemes are accounted for based on actuarial present )alue of benefits.

Ac/uired intangible assets

'apitalised if recognition criteria are metE amortised o)er useful life. Intangibles assigned an indefinite useful life are not amortised but re)iewed at least annuall& for impairment. Re)aluations are permitted in rare circumstances. Distorical cost or re)alued amounts are used. Regular )aluations of entire classes of assets are re/uired when re)aluation option is chosen.

-ropert&, plant and e/uipment

Distorical cost is used. Re)aluations are permitted, howe)er, no re/uirement on fre/uenc& of re)aluation. 4n re)aluation, an entire class of assets is re)alued, or selection of assets is made on a s&stematic basis. +reated the same as a long-term in)estment and is carried at cost less impairment. Similar to IFRS, e1cept that

In)estment propert& 9easured at depreciated cost or fair )alue, with changes in fair )alue recognised in the income statement. 'ontingencies Bisclose unrecognised possible

losses and probable gains. Co)ernment grants Recognised as deferred income and amortised when there is reasonable assurance that the entit& will compl& with the conditions attached to them and the grants will be recei)ed. 2ntities ma& offset capital grants against asset )alues.

contingent gains are neither recognised nor disclosed. Similar to IFRS conceptuall&, although se)eral differences in detail. For e.g., in certain cases, grants recei)ed are directl& credited to capital reser)e (in e/uit&).

'on)ertible debt

'on)ertible debt (fi1ed number of 'on)ertible debt is recognised as a shares for a fi1ed amount of cash) liabilit& based on its legal form is accounted for on split basis, without an& split. with proceeds allocated between e/uit& and debt. >iabilities are derecognised when e1tinguished. Bifference between carr&ing amount and amount paid is recognised in income statement. Financial statements are ad.usted for subse/uent e)ents, pro)iding e)idence of conditions that e1isted at the balance sheet date and materiall& affecting amounts in financial statements (ad.usting e)ents). Aon-ad.usting e)ents are disclosed. 'ontents are prescribed and basis should be consistent with full-&ear statements. Fre/uenc& of reporting (eg, /uarterl&, half&ear) is imposed b& local regulator or is at discretion of entit&. Ao specific guidanceE in practice, treatment would be similar to IFRS based on substance of the transaction. Similar to IFRS, e1cept nonad.usting e)ents are not re/uired to be disclosed in financial statements but are disclosed in report of appro)ing authorit& e.g. Birectors Report.

Berecognition of financial liabilities

-ost-balance-sheet e)ents

Interim financial reporting

Similar to IFRS. Dowe)er, pursuant to the listing agreement, all listed entities in India are re/uired to furnish their /uarterl& results in the prescribed format. Juarterl& results include financial results relating to the wor,ing of the 'ompan& and certain notes thereon.