IFRS Notes

International Financing Reporting
Standards
A Single set of high quality global accounting standards resulting in

transport and comparable information for one global capital market.
These standards are known as International Financing Reporting
Standards. The main constituents are :
o
o
o
o
International Financial Reporting Standards(IFRS) :1-9

International Accounting Standards(IAS) : Till 41
International Financial Reporting Interpretations Committee(IFRIC) 16
Interpretations
Standing Interpretations Committee(SIC) 11 Interpretations
IFRS Process of Standard Setting :

Every standard before being finalized has to pass through the following six stages :
Stage 1 : On the very onset, it is required to identify the various important

accounting issues that need a standard for its proper regulation. This is known as a
agenda setting stage
Stage 2 : The second stage is that of project planning. It includes taking into
account the various important elements relating to the selected agenda.
Stage 3 : After earmaking the various elements to be considered, the next step by
the members is to develop and publish a discussion paper. A Discussion paper
highlights the broad framework of the standard and the issues and their conclusions
undertaken for discussion
Stage 4: The next stage is to prepare an Exposure draft and make it open to the
general public for comments on it.
Stage 5 : After incorporating the valid comments on the exposure draft , the next
stage is to develop and publish the standard.
Stage 6 : Once the standard has been published, the final stage I of reviewing it.
Striking Features of IFRS
IFRS are principle-based standards as compared to the rule-based GAAP. This

means that they have an distinct advantage that transactions cannot be
manipulated easily.
IFRS lays down treatments based on the economic substance of various

events and transactions rather than their legal form.
Under the IFRS, the historical cost concept has been abandoned
and replaced by a current cost system for a more accurate financial
reporting. The concept of fair value accounting has taken over
historical cost accounting in financial reporting to improve the
relevance of the information contained in financial reports and getting the
balance sheet right. This has the following impact:
a. Fair value increases the transparency of the impact of market
forces on financial information by taking the current valuations
into account.
b. The fair value balance sheet restates the financial statements on
its fair market value as on balance sheet date. It refocuses
on the Balance Sheet as the primary tool in decision making
c. Fair valuation of assets and liabilities result in unrealized gains
and losses from one accounting period to another leading to
distortion in the Income statement.
d. One persons fair value may be different from anothers fair
value which might lead to distortion of financial statements.
e. Fair value system is characterized by matching the assets
with the liabilities which makes it more difficult to match
the revenues and the expenses when compared to the
financial statements based on the historical cost.
Presentation of Financial Statements (IAS 1) is significantly different from
IGAAP which follows the Schedule VI of the Companies Act, 1956. For
example
o IFRS requires clean segregation of Assets and Liabilities into current
and Non-Current groups. At present the liquidity basis is preferred as
per the Companies Act.
o IFRS also requires preparation of Statement of Other Comprehensive
Income (SOCI) and Statement of Changes in Equity(SOCE) apart from
P&L account and Balance Sheet.
o Functional Grouping of expenses is generally preferred such as
production expenses, administrative expenses, selling & distribution
expenses in IFRS.
o Under IFRS there is no concept of extraordinary or exceptional items as
in AS5.All events/transactions are considered as normal course of
business. Material items may be disclosed separately but cannot be
termed as extraordinary or exceptional
o IFRS requires stringent disclosure of :
Critical Judgment of management in applying accounting policies
Key sources of estimation uncertainty that have significant risks.
Information that enables users to evaluate entitys objectives,
policies and process of managing capital.
LIST OF IFRS
IFRS 1 First time adoption of International Financial Reporting
Standards
IFRS 2 Share Based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contacts
IFRS 5 Non-Current Assets held for sale and discontinued
operations
IFRS 6 Explanation & Evaluation of Mineral Resources
IFRS 7 Financial Instrument Disclosure
IFRS 8 Operating Segments
IFRS Meaning
IFRS are a set of International accounting standards, stating how
particular types of transaction and other events should be reported
in the financial statements. They are the guideline and rules set by
IASB which the company and organization can follow while compiling
financial statements. The creation of International standards allows
investors, organization and government to compare the IFRS
supported financial statements with greater ease.
IFRS is principle based , drafted lucidly and is easy to understand
and apply. However, the application of IFRS require an increased use
of fair values for measurement of assets and liabilities. The focus of
IFRS is on getting the balance sheet right and hence can bring
significant volatility to the income statement
Advantages of Adopting IFRS
Common Basis of Comparison : Most of the countries of the European Union
have switched over to IFRS. If companies in India also switched over to IFRS.,
it would make transactions and dealings with companies of other countries
who operate under IFRS much easier. It would also give stock holders and
other interested parties a common basis of comparability. Adopting a global
financial reporting basis will enable the company to be understood in the
global market place. It allows company to be perceived as an International
Player.
Clarity & Productivity: Under IFRS, financial makers use their own professional
judgment as to how to handle the specific transaction. This will lead to less
time being spent trying to follow all rules/complications that are coupled with
rule based accounting. It will also allow preparers of financial information to
keep statement on a simplistic and understandable forms for investors and
other companies interested in the said companys financial statements.
IFRS reporting in India :
o
o
Reporting under IFRS as proposed IFRS, as proposed by ICAI, would be

applicable for accounting periods beginning on or after April1,2011
The first set of IFRS financial statements for the year ending March
31,2012 would require preparation of :
o Opening Balance sheet as on April 1,2010
o Comparative financial statements for year ending March
31,2011
o Reporting enterprises would need tenure preparations for IFRS
reporting as early as April 2010
Keeping in view the complex nature of IFRS and the extent of
differences between the existing accounting standards and the
corresponding IFRSs,the ICAI is of the view that IFRS , should be
adopted for public interest entities from the accounting periods
beginning on or after 1st April 2011, e.g listed entities, banking,
insurance companies
IFRS for Small and Medium Sized Entities(SMEs)

o
o
o
o
SMEs need not adopt all the IFRS as it will be too voluminous for them
A Separate standard for SMEs will be formulated based on the IFRS for SMEs
which is still in exposure draft stage
The proposed standard represents a simplified set of standards for SMEs with
recognition and measurement simplified and not relevant to SMEs eliminated
Compliance with IFRS for SMEs is not necessary to make India IFRS compliant

IFRS Notes

Uploaded by

Copyright:

Available Formats

IFRS Notes

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IFRS Notes

Uploaded by

Copyright:

Available Formats

International Financing Reporting

A Single set of high quality global accounting standards resulting in

International Financial Reporting Standards(IFRS) :1-9

IFRS Process of Standard Setting :

Stage 1 : On the very onset, it is required to identify the various important

Striking Features of IFRS

IFRS are principle-based standards as compared to the rule-based GAAP. This

IFRS lays down treatments based on the economic substance of various

Reporting under IFRS as proposed IFRS, as proposed by ICAI, would be

IFRS for Small and Medium Sized Entities(SMEs)

You might also like