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    Ifrs Ifrs Presentation Transcript

    • IFRSIFRS International financial reporting standards
    • What is IFRS?What is IFRS? • IFRS stands for International Financial Reporting Standards. • 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 world. • These standards are the result of a convergence of international viewpoints. • 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 common practice.
    • 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 following: • Information systems • Tax • Treasury • Investor relations • Sales • Human resources • Mergers and acquisitions
    • Contd.Contd. • 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 following ways: – 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.
    • Contd.Contd. 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 Board (IASB): • 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 the trustees.
    • Challenges of IFRSsChallenges of IFRSs • Economic Environment • Some IFRSs require fair value approach to be followed, examples include: – 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.
    • Contd.Contd. • SME concerns SMEs face problems in implementing IFRSs because of: – Scarcity of resources and expertise with the SMEs to achieve compliance – Cost of compliance not commensurate with the expected benefits Keeping in view the difficulties faced by the SMEs, the IASB is developing an IFRS for SMEs.
    • 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 Interpretation – A large number of application issues arise while applying IFRSs. – 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 country. – To reduce or eliminate the alternatives so as to ensure comparability. – State of economic environment in the country – Level of preparedness of various interest groups involved in implementing the accounting standards.