1

UNIVERSITY OF MUMBAI

2013-14

PROJECT REPORT

ON

“INTERNATIONAL FINANCIAL REPORTING STANDARD”

SUBJECT:

“FINANCE & ACCOUNTING”

BY

NAME OF STUDENT: GANESH NIKAM

COLLEGE SEAT NO :- 119

MASTER IN COMMERCE

( SEMESTER-II )

K.M.AGRAWAL COLLEGEOF

ARTS,COMMERCE & SCIENCEKALYAN (W).

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2 CERTIFICATE

K.M.AGRAWAL COLLEGE, KALYAN

THIS IS TO CERTIFY THAT MR. GANESH NIKAM HAS WORKED AND COMPLETED

HIS PROJECT WORK FOR THE DEGREE OF MASTER IN COMMERCE IN THE

FACULTY OF COMMERCE IN THE SUBJECT OF FINANCE ACCOUNTING ON TITLE

OF PROJECT WORK TO BE WRITTEN

“INTERNATIONAL FINANCIAL REPORTING STANDARD”

UNDER MY SUPERVISION. IT IS HIS OWN WORK AND FACTS REPORTED BY

HIS PERSONAL FINDINGS AND INVESTIGATIONS.

NAME & SIGNATURE

OF

PROF. PROF

(INTERNAL GUIDE) (EXTERNAL GUIDE)

PROF.

(PRINCIPAL)

3

DECLARATION

I, GANESH NIKAM THE STUDENT OF K.M. AGRAWAL COLLEGE OF M.COM (PART-1) HERE BY DECLARE THAT I HAVE COMPLETED THIS PROJECT ON IN THE

“INTERNATIONAL FINANCIAL REPORTING STANDARD”

FOR THE ACADEMIC YEAR 2013-14.

THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

I HERE BY FURTHER DECLARE THAT ALL INFORMATION OF THIS DOCUMENT HAS BEEN OBTAINED AND PRESENTED IN ACCORDANCE WITH ACEDAMIC RULES AND ETHICAL CONDUCT.

COLLEGE SEAT NO. :- 119

YEAR:- 2013-14

DATE :-

PLACE :-

NAME & SIGNATURE

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ACKNOWLEDGEMENT

I WOULD LIKE TO THANKS EVERYONE WHO HELPED ME IN THE

COMPILING OF MY DISSERTATION, FROM, INITIAL RESEARCH TO FINAL

DOCUMENTATION. SPECIALLY THANKS TOWARDS MY INTERNAL PROJECT

GUIDE WHO SUPERVISED THIS STUDY AND GAVE VALUABLE FEEDBACK AND

ADVICE THROUGHOUT. AND ALSO I AM VERY THANKS TO MY EXTERNAL

GUIDE, PROF._________________.

I OWE MY INDEBTEDNESS TOWARDS ALL THE TEACHERS OF K.M.

AGRAWAL COLLEGE FOR THEIR COOPERATION AND ENCOURAGEMENT

EXTENDED TO ME DURING THE COURSE OF PRESENT STUDY.

I AM ALSO THANKFUL TO ALL MY FRIENDS WHO ARE THE CURIOUS

LEARNERS AND HAVE DEEPENED MY INTEREST IN THE SUBJECT MATTER

AND IN TURN, IT HAS HELPED ME TO IMPROVE MY KNOWLEDGE ON THE

THEME. FURTHER THANKS TO MY PARENTS AND MY FAMILY FOR THEIR

UNLIMITED AND SUPPORT DURING MY STUDY.

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TABLE OF CONTENTS

SR.NO. TITLE PAGE NO.

1. INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD

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2. OBJECTIVES OF IFRS 7

3 CHARACTERISTICS OF IFRS 8

4. IFRS ISSUED TILL DATE 11

5. IFRS 1 - FIRST – TIME ADOPTION OF IFRS 12

6. GLOBAL CONVERGENCE 15

7. CONVERGENCE IN INDIA 18

8. PROCESS OF CONVERGENCE TO IFRS 26

9. BENEFITS OF ADOPTING IFRS FOR INDIAN COMPANIES 27

10. CHALLENGES IN ADOPTION AND FULL COMPLIANCE WITH IFRS IN INDIA

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11. RELATED AMENDMENTS 30

12. CONCLUSION 31

13. BIBLIOGRAPHY 32

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1. INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD

The Institute of Chartered Accountant of India (ICAI) has decided the strategy for

adoption of IFRS in India with effect from 1st April, 2011. At present over 110 countries

in the European Union, Africa, West Asia and Asia Pacific regions either require or

permit the use of IFRS. Even in the US there is ongoing debate about adoption of IFRS

replacing the US GAAP.

Now the International Accounting Standards Board (IASB) that issues IFRS and

the Financial Accounting Standards Boards (FASB) that issues the US GAAP are

cooperating and they have long term projects and short term projects to converge US

GAAP into IFRS.

MEANING OF IFRS

International Financial Reporting Standards (IFRS) are global accounting standards

used by more than 100 countries in the world. The International accounting standards

Board (IASB), a private sector body, develops and approves IFRS. The IASB replaced

the International Accounting standards Committee (IASC) in 2001.

I.F.R.S. represent sets of financial reporting standards issued by International

Accounting Standards Board (I.A.S.B.). This Board is independent standard setting body

of International Accounting Standards Committee Foundation (I.A.S.C.). In July 2005

IASC Foundation was formed. It constitutes team of 22 trustees from various countries.

SCOPEOF IFRS

The term IFRS has both, a narrow and a broad meaning. Narrowly, IFRS refers

to the new numbered series of pronouncements that the IASB is issuing, as distinct from

the IAS series issued earlier. More broadly, IFRS refers to the entire body of IASB

pronouncements, including standards and interpretations.

Till date, IASB has issued 41 IAS and 9 IFRS. 33 SIC (Standing Interpretations

Committee) are also issued to provide guidance on some interpretation issues arising

from IAS and IFRS.

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2. OBJECTIVES OF IFRS

The objective of IFRS is to ensure that an entity’s first financial statements, and its

interim financial reports contain high quality information which is :

1. Transparent for users

2. Provides a suitable starting point for accounting under IFRS.

3. Can be generated at a cost which does not exceed the benefits to user.

Conceptual Framework for Financial Statements issued under IFRS is summed up below :

1. Position, Performance and Flows :

Balance sheet, Profit & Loss Statement and Cash Flow

Statements make up the financial statement of an entity. The objective of financial

statements of a business entity is to provide information about the financial

position, performance and cash flows of the entity that is useful for economic

decision making by a broad range of the users who are not in a position to

demand reports tailored to meet their particular information needs.

General purpose financial statements provide information to help users to estimate

the equity value of the reporting entity. To assess an entity’s prospects for future

net cash inflows, existing and potential investor’s, lenders and other creditors need

information about the resources of the entity, claims against the entity, and how

efficiently and effectively the entity’s management has discharged its responsibilities

to use the entity’s resources.

2. Stewardship :

Financial statements also show the results of the stewardship

of management – the accountability of management for the resources entrusted to it.

Shareholders who vote on whether to retain directors or replace them, and on how

members of management should be remunerated for their services, need information

on which to base their decisions. Shareholders’ decision making processes may

include evaluating how management of the entity performed against management in

competing entities in similar circumstances.

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3. CHARACTERISTICS OF IFRS

1. Qualitative :

The qualitative characteristics of useful financial information are the characteristics

of information that are likely to be most useful to existing and potential investors,

lenders and other creditors for making decisions about the reporting entity on the basis

of information in its financial report. Understandability, relevance, materiality, reliability

and comparability are the main qualitative characteristics.

2. Understandability :

The information provided in financial statement should be presented in a way that

makes it comprehensible by users. Users should have a reasonable knowledge of business

and economic activities and accounting and a willingness to study the information with

reasonable diligence. Relevant information should not be omitted on the grounds that it

may be too difficult for some users to understand. Classifying and presenting information

clearly and concisely makes it understandable.

1. Relevance :

The information provided in financial statements must be relevant to the decisions

of users. Information has the quality of relevance when it helps users to evaluate past,

present or future events or confirming, or correcting, their past evaluations.

2. Materiality:

Information is material if its omission or misstatement could influence the

decisions of users. Materiality depends on the size of the item or error judged in the

particular circumstances of its omission or misstatement. Materiality provides a cut-off

point for relevance.

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3. Reliability:

Information is reliable when it is from material error and bias and represents

faithfully that which it either purports to represents or could reasonably be expected to

represent. Financial statements are not free from bias if, by the selection or presentation

of information, they are intended to influence the making of decision or judgment in

order to achieve a predetermined result or outcome. The information should be complete,

neutral and free from error. To be reliable, the information in financial statements must

be complete within the bounds of materiality and cost. An omission can cause

information to be false or misleading and thus unreliable and deficient in terms in terms

of its relevance.

4. Comparability :

Users must be able to compare the financial statements of an entity through time

to identify trends in its financial position and performance. Users must also be able to

compare the financial statements of different entities to evaluate their relative financial

position, performance and cash flows. The measurement and display of the financial

effects of similar transactions and other events and conditions must be carried out in a

consistent way throughout an entity and over time for the entity, and in a consistent

way across entities. Users must be informed of the accounting policies employed in the

preparation of the financial statements, and of any changes in those policies and the

effects of such changes.

5. Timeliness :

To be relevant, financial information must be able to influence the economic

decisions of users. Timeliness involves providing the information within the decision

time frame. If there is undue delay in the reporting of information it may lose its

relevance. Management may need to balance the relative merits of timely reporting and

the provision of reliable information. In achieving a balance between relevance and

reliability, the overriding consideration is how best to satisfy the needs of users in

making economic decisions.

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6. Balance between benefit and cost :

The benefits derived from information should exceed the cost of providing it. The

evaluation of benefits and costs is substantially a judge mental process. Furthermore, the

costs are not necessarily borne by those users who enjoy the benefits, and often the

benefits of the information are enjoyed by a broad range of external users. Financial

reporting information helps capital providers make better decisions, which results in

more efficient functioning of capital markets and a lower cost of capital for the

economy as a whole.

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4. IFRS ISSUED TILL DATE

Following is the List of IFRS issued till date:

IFRS 1 First-time Adoption of International Financial Reporting

Standards.

IFRS 2 Share-based Payment

IFRS 3 Business Combinations

IFRS 4 Insurance Contracts

IFRS 5 Non-current Assets Held for sale and Discontinued operations.

IFRS 6 Exploration for and Evaluation of Mineral Assets

IFRS 7 Financial instruments: Disclosures

IFRS 8 Operating Segments

IFRS 9 Financial Instruments

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5. IFRS 1 - FIRST – TIME ADOPTION OF IFRS

Following is the summary of IFRS – 1 (First Time Adoption of IFRS).

(1) Issue Date :

IFRS 1 (First Time Adoption of International Financial Reporting Standards) was

issued in June 2003.

(2) Application :

It applies to an entity whose first IFRS financial statement are for a period

beginning on or after 1 January 2004. It applies when an entity adopts IFRSs for the

first by an explicit statement of compliance with IFRSs. Most companies apply IFRS

1 when they move from local accounting standards to international accounting

standards.

(3) Definitions :

a. First IFRS reporting period - the latest reporting period covered by first IFRS

financial statement.

b. First – time adopter – an entity that presents first IFRS financial statements in

which an explicit and unreserved statement of compliance is made.

c. Opening IFRS statement of financial position – an entity’s statement of

financial position at the date of transition to IFRSs.

d. Previous GAAP – the basis of accounting used immediately before the adoption

of IFRS.

e. Date of transition – the beginning of the earliest period for which an entity

presents full comparative information under IFRSs in its first IFRS financial

statements.

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(4) Objective :

The objective of this IFRS is to ensure that an entity’s first IFRS financial

statements, and its interim financial reports for part of the period covered by

those financial statements, contain high quality information that :

a. Is transparent for users and comparable over all periods presented;

b. Provides a suitable starting point for accounting in accordance with

International Financial Reporting Standards (IFRSs);

c. Can be generated at a cost that does not exceed the benefits.

(5) Opening BS :

An entity shall prepare and present an opening IFRS statement of Financial

position at the date of transaction to IFRSs. This is the starting point for its

accounting in accordance with IFRSs.

(6) Accounting Policies :

An entity shall use the same accounting policies in its opening IFRS statement of

financial position and throughout all periods presented in its first IFRS financial

statements. In general, those accounting policies shall comply with each IFRS effective at

the end of its first IFRS reporting period. For example, if an entity adopts IFRS for the

financial year ending on 31st March, 2012, then it should apply the accounting policies

in effect as at 31st March, 2012 for all the comparative periods.

(7) Steps :

In general, the IFRS requires an entity to do the following in the opening IFRS

statement of financial position that it prepares as a starting point for its accounting under

IFRSs :

a. Include all assets and liabilities that the IFRS require (e.g. assets held under

finance lease and lease obligations);

b. Exclude any assets or liabilities not permitted by the IFRS (e.g. “provisions”

which do not meet the definition of liability);

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c. Reclassify any item, liability or equity (current/non-current, liability/equity) in

accordance with IFRS (e.g. preferred shares with fixed maturity as debt rather

than equity);

d. Measure all assets and liabilities by applying IFRS (e.g. at cost, “fair value” or

a discounted amount); and

e. Adjust the difference due to above steps in the reserves (e.g. revaluation

reserve).

(8) Exemption :

The IFRS grants 10 limited exemptions from these requirements in specified areas

where the cost of complying with them would be likely to exceed the benefits to users

of financial statements.

(9) Prohibitions :

The IFRS also makes 4 prohibitions regarding retrospective application of IFRS in

some areas. Hindsight should not be used to revise estimates. The estimates made under

previous local standards can be revised only to correct objectives errors.

(10) Disclosures :

The IFRS requires disclosures that explain the effects of transition from previous

standards to IFRS on the entity’s reported financial position, financial performance and

cash flows. The first IFRS Financial Statement should include a reconciliation of :

(i) Equity and

(ii) Net profit, from previous GAAP to IFRS.

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6. GLOBAL CONVERGENCE

NEED :

Each country has its own set of rules, regulations and reporting standards. When a

company decides to raise capital from the foreign markets, the rules and regulations of

that foreign country will apply. The final accounts in rupees need to be translated in

foreign currency in order to be acceptable to foreign investors.

If an Indian Company wishes to raise capital in the U.S., its final accounts based on

Indian Accounting Standards need to be re – worked as per the U.S.A. accounting

standards in order to be acceptable to U.S. investors. The two SETS of accounts – local

and global – must be comparable. International analysts and investors would like to

compare financial statements based on similar accounting standards. There is a strong

need to bring about uniformity, comparability, transparency and adaptability in financial

statements. Multiplicity of accounting standards around the world creates confusion,

encourages errors and facilitates fraud.

The financial statements will not be useful if accounting for the same events and

information produces different financial statements due to adoption of different sets of

accounting standards. The cure for these ills is to have a single set of high quality

global standards. The convergence is very much essential also for companies whose

shares are listed in both domestic and foreign stock exchange.

ROLE OF IASB / IFRS :

The task of creating such ‘single set of high quality global standards, was taken up

by International Accounting Standards Board (IASB) which led to the creation of

International Financial Reporting Standards (IFRS). The goal of the IFRS is to create

single set of accounting standards that can be applied anywhere in the world, allowing

investors to compare the performance of business entities across geographic boundaries.

The harmonization of financial reporting around the world will help to raise confidence

of investors in the information they are using to make their financial decisions.

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MEANING :

(1) General : In general terms, ‘convergence, means to achieve harmony in relation

to IFRS.

(2) Precise : In precise terms, converge means “to design and maintain national

accounting standards in a way that financial statements prepared in accordance

with national accounting standards draw unreserved statement of compliance with

IFRS.

(3) Compliance with IFRS : International Accounting Standard (IAS) 1, Presentation

of Financial statements, states that financial statements shall not be described as

complying with IFRS unless they comply with all the requirements of IFRS.

(4) Exceptions : However, this does not imply that financial statements comply with

IFRS only when IFRS are adopted word by word. The IASB accepts that

“adding disclosure requirements or removing optional treatments does not crates

non – compliance with IFRS. Indeed, the IASB aims to remove optional treatments

from IFRS.” This makes it clear that if a country wants to add a disclosure that

is considered necessary in the local environment, or removes an optional

treatment, this will not amount to non – compliance with IFRS. Thus, ‘convergence

with IFRS’ means adoption of IFRS with the above exceptions, where necessary.

(5) Entities : For a country to be IFRS – compliant, it is not necessary that IFRS are

applied to all entities of different sizes and of different public interests. Even the

IASB recognizes that IFRS are suitable for publicity accountable entities. The

IASB has, therefore, recently issued a separate set of IFRS for Small and

Medium – sized Entities (SME).

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CHALLENGES :

The process of convergence faces the following challenges :

a. Preparing financial statements under IFRS poses a great challenge to the

accountants.

b. Cultural, legal and political differences may cause difficulties in convergence.

c. Reconciliation and restatement of financial statements is costly.

d. There are disagreements in some countries with the requirements of certain

specific IFRS.

e. Some IFRS are complicated in nature.

EXTENT :

IFRS are used in many parts of the world, including the European union, Australia,

South Africa and Russia. More than 100 countries have required or permitted the use of

IFRS since 2001 and the number is excepted to increase to 150 by 2011.

The Group of 20 leader countries (G20) reaffirmed their commitment to global

convergence in accounting standards in a meeting held at Pittsburgh (United States) in

September 2009, calling on ‘international accounting bodies to complete their convergence

project by June 2011’.

Some of the major countries that are seeking to converge with IFRS by 2011 include

Canada, Korea, India and Brazil.

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7. CONVERGENCE IN INDIA

NEEDS :

In the era of globalization, India cannot ignore the developments taking place

worldwide. High quality financial reporting is essential for a global capital market. A

few Indian companies are already listed on overseas stock exchanges and many more

are in the process of getting themselves listed. Also, the recent acquisitions of foreign

companies by Indian companies makes a stronger case for adoption of IFRS.

At present, the Accounting Standards Board (ASB) of the Inst. of C.A. of

India (ICAI) formulates the Accounting Standards (AS) based on IFRS. However,

these standards remain sensitive to local conditions, including the legal and economic

environment. AS issued by ICAI depart from the corresponding IFRS in order to

ensure consistency with legal, regulatory and economic environment of India.

ROLE OF ICAI :

Convergence with IFRS would require several changes in Indian laws and

decision processes. In India, the Institute of Chartered Accountants of India (ICAI) is

on way towards convergence of its Accounting Standards (AS) with global reporting

standards. The ICAI, being a member of the International Federation of Accountants

(IFAC), studies the IFRS and tries to integrate them, to the extent possible, in the

light of the laws, customs, practices and business environment.

Recognizing the growing need of full convergence of Indian Accounting

Standards with IFRS, the ICAI has constituted a Group to interact with government

and regulatory authorities. This group has constituted separate core groups to identify

inconsistencies between IFRS and various relevant acts. IFRS Task Force has also

been formed to examine various issues involved in the convergence process. The

Task Force has proposed for adoption of IFRS, in phased manner, for listed entities

and public interest entities form accounting periods commencing on or after April

1,2011.

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IFRS CATEGORIES :

The ICAI has also classified IFRS into four broad categories as part of its

convergence strategy, which can be detailed as follows :

1. First category describes IFRS which can be adopted immediately or in the

immediate future in view of no or minor differences (for example construction

contracts, borrowing costs, inventories ).

2. Second category includes IFRS which may require some time to reach a level of

technical preparedness by the industry and professionals, keeping in view the

existing economic environment and other factors ( for example, share-based

payments ).

3. Third category includes IFRS which have conceptual differences with corresponding

Indian Accounting Standards and where further dialogue and discussions with the

IASB may be required ( consolidation, jointventures, provisions and contingent

liabilities ).

4. Last category comprises if IFRS which would require changes in laws/regulations.

CORE GROUP BY MCA :

A Core Group has been constituted by the Ministry of Corporate Affairs (MCA)

for convergence of Indian Accounting Standards with International Accounting Standards

with International Financial Reporting Standards (IFRS). It is made up of various

officials from the Institute of Chartered Accountants of India (ICAI), Ministry of

Finance, Securities and Exchange Board of India (SEBI), Insurance Regulatory and

Development Authority (IRDA), Reserve Bank of India (RBI), Comptroller and Auditor

General (C&AG), Pension Fund Regulatory and Development Authority (PFRDA),

Industry representatives and other experts.

The Core Group also deals with amendments required in the Companies Act, 1956,

the related Schedules - VI AND XIV and Accounting Standards Rules for the purpose

of convergence, the implementation challenges especially those related to legal and

accounting framework and transitional issues.

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IFRS - COMPLIANT STANDARDS :

The ICAI has already started the process of issuing IFRS equivalent AS and

revising the existing standards and Guidance Notes to bring them at par with IFRS. ASB

has, so far, issued thirty five Accounting Standards.

Thirty five Indian Accounting Standards converged with International Financial

Reporting Standards ( henceforth called IND AS ) have been notified by the Ministry of

Corporate Affairs (MCA) as on February, 2011. The Ministry of Corporate Affairs will

implement the IFRS converged Indian Accounting Standards in a phased manner after

various including tax related issues are resolved with the concerned Departments. The

date of implementation of the IND AS will be notified by Minister at a later date.

Till date 41 IAS have been issued, but 12 have been withdrawn, As on date 29

IAS are in force.

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 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 & Errors

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IND AS 10 Events after the Reporting Period

IND AS 11 Construction Contracts

IND AS 12 Income Taxes

IND AS 16 property, Plant and Equipment

IND AS 17 Lease

IND AS 18 Revenue

IND AS 19 employee Benefits

IND AS 20 Accounting for Government Grants & disclosure of 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 26 Accounting and Reporting by Retirement Benefit Plans

IND AS 27 Consolidated and Separate Financial Statements

IND AS 28 Investments in Associates

IND AS 29 Financial Reporting in Hyperinflationary Economics

IND AS 31 Interests in Joint Ventures

IND AS 32 Financial Instruments: Presentation

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 assets

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IND AS 38 Intangible Assets

IND AS 39 Financial Instrument : Recognition and Measurement

(to be replaced by IFRS 9)

IND AS 40 Investment Property

IND AS 41 Agriculture

(NOTE : IND AS 101 – 108 correspond with IFRS 1- 8. IND as 1 – 40 correspond with

IAS 1 – 40.)

TWO SEPARATE SETS OF ACCOUNTING STANDARDS :

The Core Group has decided that there will be two separate sets of Accounting Standards

under Section 211(3C) of the Companies Act, 1956, which are as follows :

1. Indian Accounting Standards Converged with the IFRS :

These are the standards which are being converged by eliminating

the differences of the Indian Accounting Standards vis-à-vis IFRS. These standards

shall be applied for all companies falling under Phase I to Phase III.

2. Indian Accounting Standards notified in the Companies (Accounting Standards)

Rules, 2006 :

These are the standards used, at present, by Indian Companies

under the Companies Act, 1956. Companies not falling within the threshold limits

prescribed for IFRS compliance in the respective phases shall continue to use these

standard in the preparation and presentation of financial statements.

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PHASES FOR IMPLEMENTATION :

On 22nd January 2010, the Ministry of Corporate Affairs has

issued a press release setting out the roadmap for convergence with IFRS for certain

defined entities with effect from accounting periods commencing on or after April 1,

2011.

EXHIBIT 1 : PHASES FOR IMPLEMENTATION

Class of Companies Opening

Balance sheet

as per

converged

accounting

standards 1

Insurance Companies April 1,2012

Scheduled Commercial Banks April 1,2013

Banking

Companies

Urban Co-

operative

Banks (UCB)

Net worth in excess of Rs.300

crores

April 1,2013

Net worth in excess of Rs.200

crores but not exceeding Rs.300

crores

April 1,2014

Net worth not exceeding of Rs.200

crores

Optional

Regional Rural Banks (RRB) Optional

Non -

Banking

Financial

Companies

Companies which are a part of NSE – Nifty 50

April 1,2013

Companies which are a part of BSE – Sensex 30

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(NBFC) 2 Companies whether listed or not, which have a

not worth in excess of Rs.1,000 crores

Listed April 1,2014

All NBFCs

that do not

fall in the

above

categories

Non – listed which have a net

worth in excess of Rs.500 crores April 1,2014

Non – listed which have a net

worth not exceeding Rs.500

crores

Optional

Other

Companies

Companies which are a part of NSE – Nifty 50

April 1,2011

(Phase 1)

Companies which are a part of BSE – Sensex 30

Companies whose shares or other securities are

listed on stock exchanges outside India

Companies whether listed or not, which have net

worth in excess of Rs.1,000 crores

Other

Companies 2

Companies whether listed or not, which have net

worth in excess of Rs.500 crores but not

exceeding Rs.1,000 crores

April 1,2013

(Phase 2)

Listed companies which have a net worth not

exceeding Rs.500 crores

April 1,2014

(Phase 3)

Non – listed companies which have a net worth

not exceeding Rs.500 crores and whose shares or

other securities are not listed on stock exchanges

outside India Optional

Other defined small and medium sized companies

(SMC)

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1. The opening balance sheets shall have to be converted as per converged

Accounting Standards as on the said date.

2. For NBFCs and companies whose financial year commences on any date other

than April 1, the conversion of the opening balance sheet will be on the financial

year commencing on a date immediately following April 1 of the relevant year.

Latest Status :

MCA convened a meeting of Core Group in September 2012 to

consider the revised road map. ICAI has been requested to suggest new road map

considering the status of the IFRS developments by the IASB.

The revised roadmap to be suggested to MCA is under consideration of

the Council of the ICAI and is excepted to be finalized shortly. Implementation date will

be greatly dependent on the completion of the current projects by IASB. Regulators for

the Insurance Companies and banks have indicated that they will await the finalization of

IFRA 4 and IFRS 9

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PROCESS OF CONVERGENCE TO IFRS :

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8. BENEFITS OF ADOPTING IFRS FOR INDIAN COMPANIES

The decision by ICAI to coverage with IFRS is a path – breaking decision. It is

likely to provide the following benefits to Indian companies.

1. Improved access to International capital markets :

Many Indian companies are expanding or acquiring companies outside India – for

which huge capital is required. Majority of world stock exchange require financial

information prepared under IFRS. Change to IFRS will enable Indian companies to have

access to international capital markets as IFRS is globally acceptable.

2. Lower cost of capital :

Change to IFRS will lower the cost of raising funds, as there will be no need for

preparing two sets of financial statements (one under IFRS and another under Indian

Accounting Standards). It will also reduce audit fees and higher rate of interest.

3. Enable benchmarking with global peers and improve brand value :

Adoption of IFRS will enable companies to gain a broader and deeper understanding

of its relative standing in the global market. With adoption of IFRS companies can set

targets and milestones based on global business environment, rather than merely local

ones.

4. Escape Multiple Reporting :

Convergence to IFRS, by all group entities, will enable company managements to

have one financial reporting platform for the Indian as well as foreign components /

branches. This will eliminate the need for multiple reports and significant adjustments for

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preparing Consolidated financial statements or filing financial statements in different stock

exchanges.

5. Reflects true value of acquisitions :

In Indian GAAP, business combinations (amalgamations or absorptions), with few

exceptions, are recorded at costs and not at fair values of net assets taken over.

Purchase consideration paid for intangible assets not recorded in the vendor’s books

is usually not reflected separately in the financial statements; instead the amount gets

added to goodwill.

Hence, true value of the business combination is not reported in the financial

statements. IFRS will overcome this drawback as it requires accounting for net taken

over in a business combination at fair value. It requires recognition of intangible

assets, even though they have not been recorded in the vendor’s financial statements.

6. New opportunities :

IFRS will open up many opportunities in the services sector. With accountants

trained in IFRS, India can act as the ‘accountant’ for the global community.

As IFRS emphasizes fair value, it will provide jobs to professionals, including

accountants, valuers and actuaries. It will help the BPO (Business Process

Outsourcing) concerns in India.

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9. CHALLENGES IN ADOPTION AND FULL COMPLIANCE WITH IFRS IN

INDIA

There are several practical challenges in adoption of and full compliance with IFRS

in India.

1. Several laws and regulations governing financial accounting and reporting in India

need to be amended.

2. There are certain sections of the Companies Act that over ride the provisions of

IFRS.

3. There is a shortage of professionals with practical IFRS conversion experience and

therefore many companies will have to depend on external advisors and their

auditors.

4. There is an urgent need to build adequate IFRS skills among the Indian

accounting professionals to manage the conversion

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10. RELATED AMENDMENTS

Compliance with converged IFRS is, however, not possible until the regulations /

laws are amended. In India, IFRS convergence is subject to direct or indirect control of

several regulators, such as National Advisory Committee on Accounting Standards

(NACAS) established by the Ministry of Corporate Affaires (MCA), the Reserve Bank of

India (RBI), the Insurance Regulatory and Development Authority (IRDA) and the

Security and Exchange Board of India (SEBI).

Further, the Indian Companies Act, 1956 provides guidance on accounting and

financial reporting matters. The requirements of Schedule VI of Act, which currently

prescribes the format for presentation of financial statements for Indian companies, are

substantially different from the presentation and disclosure requirements under IFRS.

Convergence with IFRS will also require significant changes from the tax

authorities [Central Board of Direct Taxes (CBDT) ] on treatment of various accounting

transactions.

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CONCLUSION

The decision by ICAI to coverage with IFRS is a path-breaking decision. It is likely to provide the various new opportunities in Indian companies.

In Indian GAAP, business combinations, with few exceptions, are recorded at costs and not at fair values of net assets taken over. Purchases consideration paid for intangible assets not recorded in the vendor’s books is usually not reflected separately in the financial statement; instead the amount gets added to good will.

IFRS will open of many opportunities in service sector. With accountant’s trends in IFRS, India can act as the accountant for the global community. IFRS provide job to professional, including accountants, valuears and actuaries. It will also help to BPO.

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BIBLIOGRAPHY

There have been many good books on IFRS written over the years. Some of those that

have inspired the writing of this are listed & Internet sites are given below:-

SOURCES AND SUGGESTED READINGS:-1. Advance financial accounting text books.

2. Management Accounts & Financial Accounts text books (Manan Prakashan).

3. www.wikipedia.co.in