Financial Reporting and Standards

Semester 6

Batch- 2021-24

Submitted to:

Prof. Soma Kulshrestha

“Ind-AS-Need, Implementation and Challenges”

Name- Vatsal Kumar

PRN- 21020621436

Roll Number- 3281

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 Acknowledgement

I would like to express my gratitude to my esteemed professor Soma Kulshrestha for her

invaluable guidance, support, and encouragement throughout the duration of this project.

I extend my sincere thanks to Dr. Adya Sharma, for providing me with the opportunity to

undertake this project.

Furthermore, I am deeply grateful to Symbiosis Centre for Management Studies for providing

the necessary resources and facilities that made this project possible. The academic atmosphere

and access to the university's extensive library and databases have been invaluable in

conducting research and gathering relevant data.

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 Table of Contents

S. no. Title Page No.

1 Introduction 4-6
2 Important excerpts 7-8
3 Questionnaire 9-10
4 Personal Comment 11
5 Conclusion 12
6 References 13

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 Introduction

One can think of accounting standards as a universal rulebook for financial reports. They
outline consistent practices for recording and documenting a company's finances, including
assets, debts, income, costs, and ownership.

This standardization benefits everyone involved such as the banks and investors, as they gain
reliable information about businesses, while regulatory agencies have a clear yardstick for
measuring financial health.

Financial reporting gains clarity on both sides of the pond thanks to accounting standards like
GAAP in the US and IFRS internationally. US companies, public and private, stick to GAAP
as their financial roadmap, while IFRS serves as the global compass for non-US entities. For
multinational behemoths, these standards become their common language, ensuring
transparency and consistency across borders. The International Accounting Standards Board
acts as the global referee, setting the ground rules and interpreting the fine print of these crucial
reporting frameworks.

IND AS, or Indian Accounting Standards, are essentially a set of accounting principles and
standards designed to regulate how entities, including companies and NBFCs (Non-Banking
Financial Companies), prepare their financial statements. IND AS aims to shine a light on
financial statements, making them easily comparable and understandable, both within India
and across borders. This fosters transparency and allows investors and analysts to confidently
judge companies, no matter their location.

The Indian journey with IND AS unfolded in three phases:

 Phase 1 (2015): IND AS dipped its toes in the water, offering a voluntary option for
companies to test the new waters. It was an introduction, not a requirement.

 Phase 2 (2016): IND AS donned its swim cap and made splashes for bigger fish - listed
and unlisted giants with a net worth of Rs. 500 crore or more, along with their
subsidiaries and partners.

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  Phase 3 (2017): IND AS took a full-fledged dive, mandating its adoption for all listed
companies, regardless of size, and unlisted companies with a net worth between Rs.
250 crore and Rs. 500 crore, along with their affiliated entities. Note, SME listings don't
count as "listed" for this purpose. And once you're in, you can't jump back out - IND
AS is a one-way street.

This sums up the who, what, and when of IND AS applicability in India.

The following is the list of major applicable IND-AS

Ind AS 1 Presentation of Financial Statements

Ind AS 2 Inventories

Ind AS 7 Statement of Cash Flows

Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Ind AS 10 Events after the reporting period

Ind AS 12 Income Taxes

Ind AS 16 Property, Plant and Equipment

Ind AS 19 Employee Benefits

Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Ind AS 21 The Effects of Changes in Foreign Exchange Rates

Ind AS 23 Borrowing Costs

Ind AS 24 Related Party Disclosures

Ind AS 27 Separate Financial Statements

Ind AS 28 Investments in Associates and Joint Ventures

Ind AS 29 Financial Reporting in Hyperinflationary Economies

Ind AS 32 Financial Instruments Presentation

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Ind AS 33 Earnings per Share

Ind AS 34 Interim Financial Reporting

Ind AS 36 Impairment of Assets

Ind AS 37 Provisions, Contingent Liabilities and Contingents Assets

Ind AS 38 Intangible Assets

Ind AS 40 Investment Property

Ind AS 41 Agriculture

Ind AS 101 First-time Adoption of Indian Accounting Standards

Ind AS 102 Share-based Payment

Ind AS 103 Business Combinations

Ind AS 104 Insurance Contracts

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Ind AS 106 Exploration for and Evaluation of Mineral Resources

Ind AS 107 Financial Instruments Disclosures

Ind AS 108 Operating Segments

Ind AS 109 Financial Instruments

Ind AS 110 Consolidated Financial Statements

Ind AS 111 Joint Arrangements

Ind AS 112 Disclosure of Interests in Other Entities

Ind AS 113 Fair Value Measurement

Ind AS 114 Regulatory Deferral Accounts

Ind AS 115 Revenue from Contracts with Customers

Ind AS 116 Leases

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 Important Excerpts from articles and research papers

1) A goal of the International Accounting Standards Committee (IASC) , and its successor
body the International Accounting Standards Board (IASB) , is to develop an
internationally acceptable set of high quality financial re- porting standards. To achieve
this goal, the IASC and IASB have issued principles-based standards, and taken steps
to remove allowable accounting alternatives and to require accounting measurements
that better reflect a firm's economic position and performance. Accounting quality could
in- crease if these actions by standard setters limit management's opportunistic
discretion in determining accounting amounts

Reference- Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International Accounting
Standards and Accounting Quality. Journal of Accounting Research, 46(3), 467–498.
http://www.jstor.org/stable/40058143

Interpretation- Striving for global consistency and high-quality financial reporting, the
International Accounting Standards Committee (later succeeded by the IASB) aimed to
codify a set of universally accepted accounting principles. Their approach involved crafting
rulebooks based on broad principles, eliminating flexible accounting options, and
demanding financial measurements that accurately reflect a company's economic well-
being. This focus on limiting management's ability to manipulate earnings through
accounting choices, along with other systemic changes implemented alongside new
standards, could potentially enhance the accuracy and reliability of financial report

2) Evidence from the international accounting literature concludes that ac counting

standards alone do not determine the quality of financial reporting outcomes. This is
not to say that standards don't matter at all, but rather that there are many forces that

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 shape the quality of financial reporting, and accounting standards should be viewed as
but one of these. These forces include managers' incentives, auditor quality and
incentives, regulation, enforcement, ownership structure, and other institutional
features of the economy.

Reference- Holthausen, R. W. (2009). Accounting Standards, Financial Reporting

Outcomes, and Enforcement. Journal of Accounting Research, 47(2), 447–458.
http://www.jstor.org/stable/25548027

Interpretation- Just because there are international rules for how companies keep their
books (called accounting standards), doesn't mean their reports are always perfect. Think
of it like having a recipe for a cake. Even with the same recipe, different bakers might make
different choices about ingredients or baking times, and the cake might turn out differently.
Similarly, companies can still make choices that affect their financial reports, even with set
accounting standards. Things like how much pressure managers feel to make profits look
good, how good their auditors are at checking their work, and even how the country's laws
are set up, can all play a role in how accurate a company's financial report is. So, while
accounting standards are important, they're just one piece of the puzzle when it comes to
getting a clear picture of a company's financial health.

3) One of the risks attached to the development of IFRSs as global standards is that loc
variations will develop as a matter of practice or through regulatory intervention. There
is also the question of how IFRS financial statements are audited. Oversight over the
auditing profession, as well as the company preparers, is seen as critical in this context.

Reference- Fleck, R., & Cearns, K. (2008). Developments in International Accounting

Standards. The International Lawyer, 42(2), 501–510.
http://www.jstor.org/stable/23828475

Interpretation- IFRSs face potential inconsistencies that could hinder their effectiveness in
achieving uniform global reporting. First, local tweaks in interpretation or intervention can
subtly alter rule application, causing discrepancies. Second, existing local regulations may
still linger, influencing reports despite IFRS adoption. Third, rigorous oversight of both
companies and auditors is crucial, as lax enforcement could allow inaccuracies to slip

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 through. While promising, IFRSs require attention to these inconsistencies and stringent
oversight to fulfill their vision of harmonized financial reporting.

Questionnaire

1) What is your current role and the years of experience?

Ans- I am a Credit Portfolio Analyst and I have 7 years of experience in Corporate

Banking. I am currently working at HSBC.

2) What are the primary drivers behind your bank for adoption of the accounting
standards and did you encounter any resistance while doing the same?

Ans- There is an increased sense of competition today in the market which also applies
to corporate banks like us. Therefore, to gain investor’s trust, maintain transparency,
and obviously abide by statutory obligations, adopting and implementing the
accounting standards is a must for us.

There are always concerns when it comes to our accounting and IT systems being
compatible with the standards, but taking measures like hiring consultants, planned
implementation, etc. are always the right way to go.

3) Can you give a brief account of the implementation process of IND-AS in the
company?

Ans- We knew transitioning to this new set of accounting standards was crucial for
global comparability and transparency, especially for investor attraction. But as you
know, changing something deeply ingrained in our system isn’t always easy.

Imagine swapping out the tires on a speeding bike. It was messy, involved data
crunching, system tweaks, and training everyone on new gears and brakes. Accounting
and IT became a pit crew, deciphering data mountains and building tools for dynamic
tire pressure and fair value estimates. It wasn't a smooth ride, with bumps and doubts,
but a dedicated team, both internal and external, kept us rolling.

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 4) How has IND-AS adoption impacted your day-to-day work processes in the
banking sector?

Ans- IND-AS cranked up the risk analysis dial on my daily grind. Data's the new king,
demanding models, and Python pals. Investors see every bump on our loan road.
Accounting and IT joined the credit analyst posse, building tools for dynamic
provisioning and value estimates. It's a learning curve, but with new skills and a more
robust portfolio, IND-AS feels like a win-win.

5) In your opinion, has IND-AS enhanced transparency and comparability of your

bank's financial statements?

Ans- IND-AS ripped the veil off our financials, swapping misty investor views for
laser-sharp risk analysis. Sure, wrangling data and complex rules is a tussle, but the
transparency is a win. It's like building a fortress of trust, clear risk visibility, and a
sustainable future, brick by financial brick.

6) Do you have any suggestions for improving the clarity or implementation of IND-
AS standards for the banking sector?

Ans- For smoother IND-AS in corporate banking, I say simplify complex loan
guidelines, streamline data across systems, and boost training on risk models and
valuations. Let's grease the gears and not get stuck deciphering ancient scrolls.

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 Personal Comment

 The limitations of relying solely on IFRS: While principles-based standards and

reduced accounting alternatives may curb opportunistic earnings manipulation, other
factors like managerial incentives, auditor quality, regulatory environment, and
institutional context significantly influence reporting quality.

 The risk of localization: Implementing IFRS globally does not guarantee complete
uniformity. Local interpretations, pre-existing regulations, and enforcement disparities
can introduce inconsistencies, undermining the goal of comparability.

 The importance of robust oversight: Effective enforcement mechanisms for both

companies and auditors are crucial to ensure accurate and reliable financial reporting
under IFRS.

 Global Passport: IND AS is like a golden ticket into the big leagues of international
business. With this common accounting language, Indian companies can speak the
same financial dialect as global players, attracting investors, securing partnerships, and
navigating cross-border transactions with ease. Thus there are no more translation
issues, just clear financials understood by everyone.

 Transparency Revolution: IND AS has ripped the veil off Indian financial reporting.
Now, stakeholders at home and abroad get a much clearer picture of a company's health,
risks, and performance.

 Level Playing Field: IND AS has levelled the playing field for Indian companies,
letting them stand shoulder-to-shoulder with international competitors on a global

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 stage. No more accounting loopholes or confusing interpretations – just a fair fight
based on shared standards.

 Evolving Landscape: IND AS isn't a static rulebook; it's a living document adapting
to the ever-changing world of finance. This continuous evolution ensures its relevance
and effectiveness in a dynamic business environment, keeping Indian companies on
the cutting edge of global reporting practices.

Conclusion

The quest for high-quality, globally consistent financial reporting remains a complex and multi-
faceted challenge. While the International Accounting Standards Board (IASB) has made
significant strides in developing a principles-based set of International Financial Reporting
Standards (IFRS) aimed at limiting management discretion and enhancing information
comparability, the evidence suggests that standards alone are not a panacea.

IND AS has taken root in India's financial soil, aligning local practices with global norms. This
shift means clearer, more comparable financial reports, crucial for both compliance and
navigating India's dynamic business scene. As the world becomes ever more interconnected,
embracing these standards unlocks doors for Indian entities seeking wider reach and enhanced
credibility.

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 References

1) https://taxguru.in/chartered-accountant/understanding-ind-as-meaning-
applicability-entities.html
2) https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/accounting-
standards.html
3) https://www.icai.org/post/compendium-of-indian-accounting-standards-year-
2020-21-volume-i
4) http://www.jstor.org/stable/40058143
5) http://www.jstor.org/stable/25548027
6) http://www.jstor.org/stable/23828475

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