04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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INTRODUCTION INTRODUCTION TO IFRS AND TO IFRS AND

CONVERGENCECONVERGENCEN R GOVINDARAJANN R GOVINDARAJAN

FCA,AICWA,DISA,CISAFCA,AICWA,DISA,CISA

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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AS in IndiaAS in India• IAS formulated through IASC in 1973• India decides to formulate

Accounting Standards in 1977• Base approach is IAS with local laws,

customs and business environment considered

• Initially recommendatory and later made mandatory

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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AS in IndiaAS in India• Legal recognition in 1999• Other regulatory bodies also insist on

AS• Recent notification - AS rules 2006• Gap bridging exercise started in 2000• Several new Accounting Standards

introduced• Introduction of new accounting

concepts

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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What is IFRS?What is IFRS?• It is an accounting frame work which

has world wide acceptance• Developed by a body called IASB• Prior to that there was a body called

IASC and in 2001 it was replaced by IASB

• Hence all the IAS issued by the IASC and the new ones issued by IASB are collectively called IFRS

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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What is IFRS?What is IFRS?• Till date IASB has so far issued 30 IAS

and 8 IFRS• In More than 100 countries either

IFRS is required or permitted• India does not follow IFRS but has its

own GAAP which is more in tune with IFRS and has now amended its GAAP to fine tune with IFRS

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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The Composition of IFRSs The Composition of IFRSs

• IFRSs comprise of :

• International Financial Reporting Standards

• International Accounting Standards and

• Interpretations originated by the International Financial Reporting Interpretations Committee( IFRIC)

• Standing Interpretations Committee ( SIC).

• As of date, there are – – 8 International Financial

Reporting Standards (IFRS) ,

– 29 International Accounting Standards ( IAS) ,

– 17 IFRIC interpretations and

– 11 SIC interpretations

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Consequences of convergence Consequences of convergence

• Not a mere technical exercise• Preparatory exercise is needed

before the change happens• Big change is expected in the ratios

of entities• Has an impact on investors, analysts

and bankers

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Transition to IFRSTransition to IFRS• India to converge with IFRS from 01 04 2011 as

announced by ICAI• Globally the momentum is towards

convergence of AS and good quality of financial reporting

• No need for translation• Better comparison and transparency• Eliminates multiple reporting and helps in

understanding of foreign investors who do not have knowledge of Indian accounting standards

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Need for convergenceNeed for convergence• Cross border transactions facilitation• Improved foreign investments• Availability of relevant and

comparable information• Professional scope widen and

mobility improved• Increased industrial growth

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Need for convergenceNeed for convergence• Removal of information and capital

flow barriers• Out of 40,000 companies listed in 51

stock exchanges worldwide, 2700 were cross border listings in Oct 2006

• New financial instruments , complexity and diversified accounting practices

• Consolidation constraints

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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ConstraintsConstraints• Resources• Equipping the industry and

professionals• Information systems challenges• Tax implications• Impact on performance indicators • Effect on profits and its distribution• Managerial remuneration and impact

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Convergence of AS with Convergence of AS with IFRSIFRS

• Questions before India• Is a convergence required?• Any other option or alternative

available?• What is the cut off date?• Adoption or convergence?• Constitution of task force• Concept paper submitted• Road map laid

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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IFRS and Indian road mapIFRS and Indian road map• Regulators have decided to converge AS

with IFRS from accounting period commencing from 01 04 2011

• Phased implementation of convergence• It would be for listed companies, banks,

insurance and other large corporates• ICAI expects smooth transition to IFRS by

training its members so that they would be fully equipped to meet the challenges that lie ahead

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Date line IFRS Date line IFRS CONVERGENCECONVERGENCE

• ..\..\..\IFRS DATE LINE 2010\DATE LINE IFRS FEB 10.pdf

• BANKS AND INSURANCE

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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Key conceptual differencesKey conceptual differences• Proposed dividend• Historical cost vs Fair value• Depreciation rates• Concept of control• Preference shares• Decommissioning cost• Business combinations

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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ConclusionConclusion• Speedy approval of converged

standards AND notification • Saral Schedule VI• Amendments to Companies Act• Speed mismatch between IASB and

Indian regulators

04/08/23 N R GOVINDARAJAN FCA,AICWA,CISA,DISA Chartered Accountant

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