i f r s

IFRS 1 is a financial reporting standard under International Financial Reporting Standards (IFRS) that stipulates the requirements for an entity that is preparing IFRS compliant financial statements for the first time. It only applies once, at the time of changeover, and is mandatory guidance on the adoption of IFRS. Accordingly, it will be applicable for the vast majority of entities adopting IFRS in Canada in 2011. The objective of IFRS 1 is to provide a consistent framework within which entities can start to apply IFRS. Included in IFRS 1 is a requirement for retrospective (or retroactive) application of each IFRS. Otherwise stated, creating a starting point which assumes that IFRS had always been followed.
2011 may seem a long way off; however, an entity is required to prepare and present an opening IFRS statement of financial position at the date of transition to IFRS. This will be January 1, 2010 for Canadian companies with December 31 year ends that are adopting IFRS on January 1, 2011 with one comparative period.


Indian accounting standards will converge fully with the International Financial Reporting Standards (IFRS) by 2011, according to Ved Jain, president of the Institute of Chartered Accountants of India (ICAI).

He said ICAI has recently decided that its accounting standards will be fully in line with the IFRS from April 1, 2011, and is working towards that direction.

The National Advisory Committee on Accounting Standards (NACAS) is reviewing AS-30, AS-31 and AS-32. Following this, AS-32 will become mandatory from April 2011, Jain said.

In May, the ICAI had introduced AS-32 as an instrument to allow shareholders evaluate the degree of financial risk a company has taken with instruments like derivatives.

AS-32 came as a follow up of AS- 30 and AS- 31 introduced in December 2007. All these standards work as a tool to put on the balance sheets the profits & losses incurred from foreign currency investment in the futures market, to guide investors.

Companies often invest their foreign exchange earnings in the futures market to earn profits from currency movements, ICAI officials said.

Jain said there are now more than 100 countries across the world where IFRS is followed. Once the Indian accounting standards converge with the IFRS, it would be first applicable for the listed companies and then for other entities in phases.
The US is proposing that foreign filers can comply the GAAP if they adopt the IFRS standards.

IFRS would be very much effective for the business process outsourcing (BPO) and the knowledge process outsourcing (KPO) business in India.

The basic concepts underlying preparation of financial statements will undergo significant change upon implementation of International Financial Reporting Standards (IFRS) in India. There are three key aspects that run through each principle laid down in IFRS: substance over form, use of fair value, and recognizing time value or time cost of money. These three items need to be understood carefully.
Indian GAAP (generally accepted accounting principles), like any other GAAP, also recognizes the importance of substance over form. Accounting Standard 1 (AS-1) on “Disclosure of Accounting Policies” states that substance rather than form should be the guiding principle in selection and application of accounting policies. However, the true application of this principle will happen only under IFRS. That’s because IFRS is more contemporary and has prescribed the treatment for evolving issues. Also, unlike Indian GAAP, it does not recognize the concept of a legal override. Thus, IFRS will always go by the core substance of the transaction.

IFRS recognizes that value of money changes with time. It will either be a cost or income, but there is a difference in Rs100 of today and Rs100 two years back or three years later. Hence, IFRS requires receivables and payables, that is, financial assets and liabilities or monetary items to be reflected at current value. Thus, the value of Rs100 payable in three months will be different from Rs100 payable after 36 months.
Consequent to these aspects, IFRS will focus on reflecting the working results and state of affairs of a business more on a current state basis rather than on a holistic long-term or historical cost basis. It will not place undue premium on prudence but push for recording of market gains and reflection of market-related realities over the reporting period. IFRS will allow flexibility in choosing the right accounting policy, but will also lead to enhanced disclosure requirements. Therefore, estimation efforts, subjectivity and judgment will increase manifold in preparing IFRS financial statements. And timelines and costs will also go up accordingly.

That said, the benefits of IFRS are expected to far outweigh the costs and hassles. It will integrate domestic businesses with the global investor and financial community so that there is no language gap and barrier. It will enhance the global competitiveness of Indian businesses as well as finance professionals. And IFRS-literate people will fuel the next wave of the knowledge processing outsourcing boom.


India will move to IFRS starting 2011. Navin Agrawal is a director with Ernst & Young India Pvt. Ltd. This is the second of a series that will analyse the impact of IFRS on industries and regulatory issues pertaining to its convergence with Indian GAAP

The aim is to meet huge demand of IFRS-trained professionals that India will need once the Institute of Chartered Accountants of India (ICAI) adopts IFRS on April 1, 2011.
The course module will be jointly developed by both partners and taught by both institute's faculty and financial experts from PwC. Initially, there will be short duration classroom courses followed by satellite-based distance learning programmes.
The Centre for Governance at IIM-C, along with PwC will also undertake specific training courses on IFRS, risk accounting, and other issues for non-executive directors from the corporate governance point of view.
Kaushik Dutta, leader, IFRS Practice, PwC, said, "With new accounting standards, there will be a new accounting language and company directors need to know the Indian GAAP."
He said that while IFRS will be adopted in a phased manner, starting with listed companies, or those with a turnover of Rs 100 crore, it will benefit industry by allowing it to operate in a globally competitive environment.

International Financial Reporting Standards

Users of financial statements have always demanded transparency in financial reporting and disclosures. However, the willingness and need for better disclosure practices have intensified only in recent times. Globalization has helped Indian Companies raise funds from offshore capital markets. This has required Indian companies, desirous of raising funds, to follow the Generally Accepted Accounting Principles (GAAP) of the investing country. The different disclosure requirements for listing purposes have hindered the free flow of capital. This has also made comparison of financial statements across the globe impossible. A movement was initiated by an International body called International Organization of Securities Commissions (IOSCO), to harmonize diverse disclosure practices followed in different countries. The capital market regulators have now agreed to accept IFRS (International Financial Reporting Standards) compliant financial statements as admissible for raising capital. This would ease free flow of capital and reduce costs of raising capital in foreign currencies.
The policy makers in India have also realized the need to follow IFRS and it is expected that a large number of Indian companies would be required to follow IFRS from 2011. This poses a great challenge to the preparers of financial statements and also to the auditors. There is an urgent need to understand the nuances in IFRS implementations.

Programme Objectives
This programme provides an in-depth analysis of the accounting and disclosure requirements under IFRS. The programme presents the information needed to navigate complex issues surrounding the recognition and measurement of financial elements under both IFRS, an area closely scrutinized by regulators such as the SEC in the US and the Financial Reporting Review Panel in the UK.

The programme always keeps the Indian financial reporting requirements (Indian GAAP) in perspective and explains the differences in Indian GAAP and IFRS. This helps the participants to appreciate the major areas of difference and thus provides necessary information and knowhow to restate Indian Financial Statements as per IFRS.


Programme Structure and Contents

The IFRS programme will be delivered in two independent modules- Basic and Advanced. The basic module will cover in details the areas of differences between Indian GAAP and IFRS with respect to major line items in the financial statements. The advanced module will lay more emphasis on reconciliation and compliance issues.

The duration of basic module is five days and that of advanced module three days.

Contents of the Basic Module [ 5-day module]

1. Issues in first time adoption of IFRS.
2. Presentation of financial statements
3. IFRS provisions for select items:
a. Accounting policies, estimates, and errors
b. Income Recognition
c. Accounting for PPE
d. Accounting for intangible assets, Impairment
e. Lease accounting
f. Income recognition
g. Accounting for liabilities
h. Tax accounting
i. Accounting for Foreign exchange Transactions
j. Business combination
k. Consolidated financial statements and disposal of subsidiaries
l. Segment reporting
m. Investment Property
n. EPS
o. Employee Benefits and Pension liabilities
p. Share based payments
q. Introduction to Financial instruments
4. What if situations
5. Key IFRS issues in select industries
6. Capstone exercise: Restatement of Financial Statements- from Indian GAAP to IFRS