Bvwse Gal What is IFRS ? + IFRS is a globally recognized set of Standards for the preparation of financial statements by business entities: + TERS is designed to provide a global framework for bow public companies prepare and disclose their financial ‘+ Many countries (120 countries ) around the world have adopted the Intemational Financial Reporting Standagds (IFRS). + Adopting a single set of world.wvide standards simplifies accounting procedures for investors and auditors with a cohesive view of finances, is.a single set of high quality. understandable, enforveable and globally accepted clearly articulated principles.7" 209 @® (nmi . Purpose of IFRS = Fnhances intemational comparability and quality of information — Enables market participants to make informed decision — Reducing the information gap between the providers of capital and the people to whom they have entrusted their money = Dynamic importance to regulatory around the world = Helps investors to identify opportun and risks across the world, be. * = For businesses, the use of a single, trusted 1g language lowers the cost of eapital and reduees intemational reporting costs,How are IFRS developed + IFRS is developed by the IASB- International Accounting Standard Board “+ Itis supported by an external IFRS Advisory Couneil, an Accounting Standards Advisory Forum (ASAF) of national __standard-setters and an IFRS Interpretations Committee (the “Interpretations Committee’) to offer guidance when ce in practice occurs. vs a thorough, open, participatory and transparent due process. ; investors, regulators, business leaders and the global accountancy profession at every stage of the |Structure of IFRS Foundation ct ened eeees TS Gariliceaiss gp) 0) seach @@ =| [El ~ |[ eeneneton || If ce _oa eB TY By &- 2) 0 | | By Components of IFRS The 'FRS consists of: 1) The Conceptual Framework for the Financial Reporting 2) International Accounting Standards (issued by IASC) 3) SIC (Standing Interpretation of committee) 4 4) Interpretations Financial Reporting standards (issued by IASB) 3 >) TFRIC (International Financial Reporting Interpretations Committee)Role of IFRS Conceptual Framework > Conceptual Framework sets out agreed concepts that underlie financial reporting and the IFRS Framework addresses: the objective of financial reporting the qualitative characteristics of useful financial information of the reporting entity the definition, recognition and measurement of the elements from which financial statements are constructed ~ concepts of capital and capital maintenance 3B uses Conceptual Framework to set standards which * enhances consistency across standardsesgn Tansions Animations Y —Openin Desktop App yA we BI Contd.. + The revised Conceptual Framework for Financial Reporting (Conceptual Framework) issued in March 2018 is effective immediately for the Intemational Accounting Standards Board (Board) and the IFRS Interpretations Committee. + The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS Standards. + Ithelps to ensure that the Standards are conceptually consistent and that similar transactions are treated the same way, so as to provide useful information for investors, lenders and other creditors. The Conceptual Framework also assists companies in developing accounting policies when no IFRS Standard applies to a particular transaction, and more broadly, helps stakeholders to understand and interpret the StandardsGeneral Features of IFRS Fair presentation and compliance with IFRS Going concern Accrual basis of Accounting Materiality and aggregation Offsetting Frequency of reporting Comparative information Consistency of presentation @@® 2) FF - | Beomersaton =| [eleson > Vv a Z| 9 | |B Tiarstions Animations — OpeninDesktop App @ Seach, a x B Objective of Financial Reporting under IFRS that is useful to existing and potential investors, lenders and Provide financial information about the reporting entity other creditors in making decisions about providing resources to the entity “The users need information about the resources of the entity to assess an entity's prospects for future net cash inflows and effectively and efficiently management has discharged their responsibilities to use the entity's existing resourees To assess an entity's prospects for furure net cash inflows, existing and potential investors, lenders and other ereditors need information about = the resources of the entity ® claims against the entity and vent and governing board have discharged their responsibilities = how efficiently and effectively the entity's mana to use the entity's resources © Bg: Protecting the entity's resources from vnfavourable effects of economic factors such as price and technological changesSgnillfanstions| Animations ~ — OpeninDeskiop App Search 54 me BT Um. A India First Step towards IFRS * The Institute of Chartered Accountants of India (ICAI) being the premier accounting standards-setting body in India, way back in 2006, initiated the process of moving towards the International Financial Reporting Standards (IFRS) issued by the International _ Accounting Standards Board (IASB) with a view to enhance acceptability and transparency 4 of the financial information communicated by the Indian corporates through their nancial statements. ove towards IFRS was subsequently accepted by the Government of India. peak of India in consultation with the ICAI decided to converge and: Dy. sesivon cre s H~~ —OpeninDesttop App Search Contd.. * The decision of convergence rather than adoption was taken after the detailed analysis of IFRS requirements and extensive discussion with various stakeholders. + Accordingly, while formulating IFRS-converged Indian Accounting Standards (Ind AS), efforts have been made to keep these Standards, as far as possible, in line with the corresponding IAS/IFRS and departures have been made where considered absolutely essential. anges have been made to make it consistent with the terminology used in law, e.g., ‘statement of and loss’ in place of ‘statement of comprehensive income’ and ‘ balance sheet’ in place of of financial position’. have been made considering the economic environment, customs andsion Tanstions Animations OpeninDesktop App Search -oa( Boh.U Why companies are adopting IFRS inspite of Indian GAAP ? IFRS offers many benefits over the Indian -\- “ aor. ? indian GAAP \s becoming rare because it has v some limitations if we compare it with IFRS. ‘AS global capital markets become increasingly integrated, many countries are cise of professional judgment adopting IFRS increasingly being recognized as “More than hundred countries already permit g Standards for financial ‘the use of IFRS In their countries.Why IFRS is required? + Better understanding of Financial Statements globally and increased confidence among investors. * Decreased burden of Financial Reporting and lower cost of preparing financial statements. + Beneficial for Accounting professionals to render their services around the globe as international clients. + Raise the reputation and relationship of Indian corporate world a with International Financial community. ~its OP 3 in India n India would result business Lnplementation of I ould encourage Poneign investing Poneign capital inPiowsMnerease in cost initially due Tequirement which en full convergent Is achieved Mirren accounting fa affected by | Itmplementator Inenous regulatory a lows. Of FRS may be r Implementatio: lenges in India1. Training. La Contd. As in the case of two sides of ac: They are following along with utilities it also consists of chal auditors, tax authoritie can be uniformly understood and consistently 2. Amendments in Regulations to adapt to IFF amend our gules regulations. As Indian accounting practices arc \ Tax Act 19 Reserve Bank of India Act nce and R P etc. and accounting framework in India is deeply affected by laws and regulations, which are different from IFRS, adequate changes or amendments is required to make in various laws an ations. it ow IFRS, Thus legal constraints are major challenges would be faced.ma Contd.. 3, Awareness. The adequate knowledge about IFRS is still limited to few numbers of people in In the stakeholders like firms, banks, shareholders, exchanges etc. are not aware about the same, Such lack of awareness about these standards is one of the major challenges faced by Indians 4, Use of fair value measurement base. IFRS uses fair value base to measure majority of items in the financial statements, The use of fair value accounting can bring a lot of volatility and subjectivity in financial statements, ¢.g: it would increase volatility in reported earnings and related performance measures such as EPS (Earnings per Share), PE (Price Earnings) Ratio etc. Thus fair value (reflecting the true worth of assets) results in gains or losses which are reflected in Profit and Loss accounts. Indian corporate entities which prepare financial statements on historical costs will need to have enough time for shifting into fair value accounting,j Contd. 2 5. Change in IT 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 required for disclosure such as fair values of financial instruments, related party transactions, segment information etc. city of resources and lack of expertise with SME (Small 6. SME concerns. S t as a barrier for -onvergence to IFRS. As process of Manufacturing Secto far as SME are concerned, cost would surpass its benefits as a result of tacts as a challenge. convergence with the IFRS. Hen:XB New ste aa Contd.. 7. Financial reporting system. In India financial reporting is done according to standards issued by ICAI (Institute of Chartered Accountants of India). We need to amend the same to suit the requirements of IFRS. The information sys ems should be designed to capture new requirements related to fixed assets, segment disclosur s, related party transactions ete. Current accounting framework in India is deeply affected by laws and regulations. It is required to make amendments in various laws and regulations 8, Cost. Increase in cost initially due to dual reporting requirement, which entity might have to meet till the full convergence is achieved. Organisations would incur additional costs for modifying their current accounting procedures for meeting the new disclosures and reporting requirements.IFRS Compliance * Counties adopting IFRS * Preparing own standard Us Prepared by IASB- but in line with IFRS ersed IFRS International Accounting * Disc Standard Board Like BANGLADESH * Like INDIA N USA 4 IFRS IFRS Adoption Convergence