Converging in to International Financial Reporting Standards

8/14/2019 Converging in to International Financial Reporting Standards

1/20

Infosys technologies LTD- it was foundedon july 2,1981 in pune by NR Narayana

Murthy and 6 other people .the companywas incorporated as private company and

went public in 1993.in its recent annual

reports , infosys technologies limited alsoprovides its balance sheet as per the inter

national financial reporting standards


2/20

IFRS are standards ,interpretations andframework adopted by the internationalaccounting standards board [IASB] whichwas issued between 1973 and 2001 byIASC


3/20

Structure of IFRS Framework Role of framework

Objective of financial statement Assumptions Qualitative characteristics of financial

statement Elements of financial statement


4/20

Generally accepted accounting principles is theterm used to refer to the standard framework of

guidelines for financial accounting used in anygiven jurisdiction

GAAP includes the standards conventions and rulesaccountants follow In recording and summarizing

transactions and in the prepration of financialstatements


5/20

Financial accounting is information that must be

assembled and reported objectively. The thirdparties who must rely on such information have a

right to be assured that the data are free from biasand inconsistency, whether deliberate or not .for

this reason financial accounting relies on certainstandards or guides called GAAP. In any report of

financial statements [audit, compilation and reviewetc] the auditor must indicate to the reader whether

or not the information contained within thestatements complies with GAAP


6/20

PRINCIPLE OF REGULARITY regularity canbe defined as confirmity to enforced rules

and laws PRINCIPLE OF CONSISTENCY- this principle

states that when a business has once fixeda method for the accounting treatment of

an item, it will enter all similar items thatfollow in exactly the same way

PRINCIPLE OF SINCERITY- according to thisprinciple, the accounting unit should

reflecting good faith the reality of thecompanys financial status


7/20

PRINCIPLE OF PERMANENCE OF METHOD this principle aims at allowing thecoherence and comparison of financialinformation published by the company

PRINCIPLE OF NON-COMPENSATION OFTHE COMPANY- one should show the fulldetails of the financial information and not

seek to compensate a debt with an asset,a revenue with an expense etc

PRINCIPLE OF PRUDENCE- this principleaims at showing the reality as is one

should not try to make things look prettierthan they are . Typically , a revenueshould be recorded only when it is certainand a provision should be entered for an

expense which is probable


8/20

PRINCIPLE OF CONTINUITY when statingfinancial information , one should assumethat the business will be interruped. This

principle mitigates the principle ofprudence, assets do not have to beaccounted at their disposable value ,but itis accepted that they are their historicalvalue

PRINCIPLE OF PERIODICITY- each

accounting entry should be allocated to agiven period and split accordingly if itcovers several periods . If a client prepaysa subscription the given revenue shouldbe split to the entire time span and not

counted for entirely on date of thetransaction PRINCIPLE OF FULL DISCLOSURE- all

informations and values pertaining to thefinancial position of a business must bedisclosed in the records


9/20

IFRS & Indian GAAP

The IFRS or the International Finance Regulation Standardsare defined by the International Accounting StandardsBoard. The IFRS is increasingly being adopted bycompanies across the globe for preparing their financialstatements. IFRS comprises of International FinancialReporting Standard, International Accounting Standard, and

Interpretation originated by the International FinancialReporting Interpretations Committee.

Indian GAAP are the standards notified by the central govt.under the companies (Accounting Standard)Rules,2006(applicable to all companies) vide notification G.S.R.739(E)dated 7 Dec. 2006 and to the relevant requirements of the

companies Act,1956.


10/20


11/20

3.Omission or misstatementsare material if individually orcollectively they could

influence the economicdecisions of users taken onthe basis of financialstatements.

3. Financial statement shoulddisclose all material items,i.e. items the knowledge of

which might influence thedecisions of the user of thefinancial statements.

4. An entity is required to presentcurrent & non-current assets

and liabilities, as separateclassifications in the statementof financial position

4. No such classification arerequired

5. Fair presentation requiresfaithful representation of the

effects of the transaction, otherevents and conditions inaccordance with the definitionsof and recognition criteria forassets, liabilities, income andexpenses set out in the frame

work.

5. Fair presentation requirescompliance with the applicable

requirements of the companiesAct,1956 and the other regulatoryrequirements and the applicationof the qualitative characteristics ofthe accounting standardframework.


12/20

31.03.05 31.03.06 Absolute

increase/decrease

Percentage

change

Sources of fund:

Sh.holders fund

Capital 135 138 3 +2.22

Res. & surplus 5090 6828 1738 +34.14

Total Sh.holderfund

5225 6966 1741 +33.32

Other L.T.Liability 94 68 -26 -27.65

C.Liabilities &Prov.

Liabilities 656 934 278 +42.37

Provisions 777 1412 635 +81.72

Total C.L. & Prov. 1433 2346 913 +63.71

Application of


13/20

Application offund:

Fixed Assets

Net Gross Block 1256 1655 399 +31.76

Capital work inprogress

318 571 253 +79.55

Investments 1211 755 -456 -28.97

Deferred Tax Assets 45 65 20 +44.44

C.A.,loans & Adv.

S. Debtors 1322 1608 286 +21.63

Cash & Bankbalance

1576 3429 1853 +117.57

Loans & Advances 1024 1297 273 +26.66

Total C.Assets 3922 6334 2412 +61.49

Total Application offund

6752 9380 2628 +38.92


14/20

In current Assets total increase amounts to 2412crores (61.49%). The increase in cash was the mosti.e. Rs.1853 crores(117.57%)

Current Liabilities increases up to Rs 913crores(63.71%).This increase is greater than

increase in current asset that means in 05-06 theliquidity of Infosys has decreased. During the yr. 05-06 reserves & surplus have

increased by Rs 1738 crores(34.14%). The Sh.Holder fund have increased by Rs 1741 crores(33.32%) which represent the financial soundness

of the business. During the year the investment has been decreased

& is used to pay off its other long term liability.


15/20

Assets:

Current Assets

Cash & cashequivalents

410 889 479 116.8%

Investment inliquid mutualfund unit

278 170 -108 -38.8%

Trade accountreceivable

303 361 58 19.14%

Unbilledrevenue 32 48 16 50%

Other C.A.&prepaid exp.

35 40 5 14.2%

Total C.A. 1058 1508 450 42.5%

Property 352 491 139 39 4%


16/20

Property,Plant &equipments

352 491 139 39.4%

Goodwill 8 8 0 0%

Deferred taxasset

10 14 4 40%

AdvanceIncomeTax

_ 18 18 _

Other assets 26 27 1 3.8%

Total Assets 1454 2066 612 42%

bilities &


17/20

bilities &Holdersity

rent Liability

ountable

1 3 2 200%

me taxable

23 _ -23 -100%

nt deposits 7 2 -5 -71.4%

arnedenue

20 44 24 120%

er accruedilities

124 160 36 29%

al current

ilities

175 209 34 19.4%

-currentility

ferred stockubsidiary

21 _ -21 -100%

- Stock holders


18/20

Stock holder sequity

Equity shares 31 31 0 0%

Additional paidin capital

279 428 149 53.4%

Accumulated

othercomprehensiveincome

33 9 -24 -72.7%

Retainedearning

910 1369 459 50.4%

Minority interest_ 15 15 _

Total Liability 1454 2066 612 42%


19/20

A/c to Indian GAAP

Deferred tax asset= Rs 65 crores

A/c to IFRS

Deferred tax asset= 14 million $Comparing both, we get

1$=650000000/14000000

=Rs 46.42

Thus currency rate is 1 USD = Rs 46.42


20/20

Indian GAAP has followed the Accountingstandard of India (AS1) while IFRS hasfollowed International Accounting Standards(IAS1).

A/c to IFRS total CA has increased up to42.5 % while a/c to Indian GAAP theincrease in CA is up to 61.49%.

IFRS has made differentiation regarding CA,non CA, liabilities & non liabilities howeverits not in Indian GAAP.

Converging in to International Financial Reporting Standards

Documents

Transcript of Converging in to International Financial Reporting Standards