What is IFRS?What is IFRS?
• IFRS stands for International Financial Reporting
• As indicated within the title, these standards are aimed at
a global practice.
• Ultimately, the goal is to achieve a single set of high-
quality, common accounting standards used around the
• These standards are the result of a convergence of
• These standards are for publicly accountable entities.
– Small and medium-sized entities (SMEs) that do not
have public accountability may use a simplified version
of IFRS known as IFRS for SMEs.
– IFRS for SMEs has recently been accepted for non-SEC
registrants by the AICPA as an acceptable alternative
reporting standard to US GAAP; however, it is not yet
Why is it important to learn aboutWhy is it important to learn about
IFRS today?IFRS today?
– Under IFRS 1, First-time Adoption of International
Financial Reporting Standards, there is a variety of
exemptions and options that the preparer may elect to
utilize in the adoption process that need to be
assessed to best position the company.
– The IFRS adoption and convergence efforts impact
much more than just the accounting function.
Additional functions that are impacted include the
• Information systems
• Investor relations
• Human resources
• Mergers and acquisitions
• Knowledge of IFRS provides an ability to
practice accounting in the global marketplace.
• Through convergence efforts, US GAAP
continues to become more aligned with IFRS.
• US practice of IFRS currently exists in the
– Foreign multinationals that report using IFRS have US
operations. While some of these entities file IFRS
financials with regulators of foreign exchanges, some
file with the SEC as foreign private investors (FPIs)
under IFRS as well.
– US multinational companies have foreign operations
that are required to report using IFRS.
– Many US companies are making assessments of the
potential impact of adopting IFRS and IFRS
convergence efforts on their current operations.
Given the level of IFRS
knowledge expected by US
practitioners today, the AICPA
is including IFRS in the content
specifications for the Certified
Public Accountant exam
beginning January 1, 2011.
Who are the internationalWho are the international
standard setters?standard setters?
International Accounting Standards
• The IASB develops IFRS.
• The IASB is an independent group of
15 full-time members.
• The board intends to expand to 16
members by 2012.
• These members are appointed by
Challenges of IFRSsChallenges of IFRSs
• Economic Environment
• Some IFRSs require fair value approach to be followed,
– IAS 39, Financial Instruments: Recognition and Measurement
– IAS 41, Agriculture
• The markets of many economies such as India normally
do not have adequate depth and breadth for reliable
determination of fair values.
• With a view to provide further guidance on the use of fair
value approach, the IASB is developing a document.
• Till date, no viable solution of objective fair value
measures is available.
• SME concerns
SMEs face problems in implementing IFRSs
– Scarcity of resources and expertise with the SMEs to
– Cost of compliance not commensurate with the
Keeping in view the difficulties faced by the
SMEs, the IASB is developing an IFRS for
Training to Preparers
– Some IFRSs are complex.
– There is lack of adequate skills amongst the preparers
and users of Financial Statements to apply IFRSs.
– Proper implementation of such IFRSs requires extensive
education of preparers
– A large number of application issues arise while applying
– There is a need to have a forum which may address the
application issues in specific cases.
Convergence with IFRSs:Convergence with IFRSs:
Indian PerspectiveIndian Perspective
• Indian Accounting Standards (ASs) are
formulated on the basis of the IFRSs.
• While formulating ASs, the endeavor of the
ICAI remains to converge with the IFRSs.
• The ICAI has till date issued 29 ASs
corresponding to IFRSs.
• Some recent ASs, issued by the ICAI, are
totally at par with the corresponding IFRSs,
e.g., the Standards on ‘Impairment of Assets’
and ‘Construction Contracts’.
IFRSs: Indian perspective (contd. …)IFRSs: Indian perspective (contd. …)
• While formulating Indian Accounting
Standards, changes from the corresponding
IAS/ IFRS are made only in those cases
where these are unavoidable considering:
– Legal and/ or regulatory framework prevailing in the
– To reduce or eliminate the alternatives so as to
– State of economic environment in the country
– Level of preparedness of various interest groups
involved in implementing the accounting standards.